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Older borrowers are locked out of credit

Older borrowers are locked out of credit

Category: Credit cards

Updated: 16/11/2015
First Published: 20/10/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Have you ever found it difficult to secure finance? If you're approaching retirement age, you could unfortunately be finding it increasingly tricky, with analysis showing that many older borrowers could find themselves locked out of finance.

Good intentions – with unfortunate consequences

This growing difficulty is largely the result of tighter regulations implemented in the wake of the financial crisis. Since then, personal finance products have come under greater scrutiny in order to protect those with poor credit ratings from borrowing beyond their means, and while this regulation has been put in place for the right reasons, it is also having a negative impact on older borrowers.

Many are increasingly facing high minimum income or funding requirements or, even worse, being turned away from finance altogether, despite the fact that many could be able to comfortably afford the repayments even in later life.

"It can often feel as though older borrowers are penalised just for their age, regardless of their personal circumstances," said Charlotte Nelson, finance expert at Moneyfacts. "With society changing and more people working well beyond their retirement age, it seems unfair that despite having the means to repay loans, they are still being barred from some of the best deals on the market."

How could you be affected?

  • Mortgages

Remortgaging when close to traditional retirement age can be difficult due to the age restrictions put in place by many lenders, but unfortunately, this is something that a growing number of people could face. The average age of first-time buyers is increasing and many are opting for longer repayment terms in order to reduce their monthly repayments, but despite this having short-term benefits, more and more buyers could find themselves in an awkward position in the future.

"The average maximum age at the end of a mortgage is currently 67, which could cause remortgagors aged 50 and over to struggle," said Charlotte. "Some lenders are more flexible and agree to weigh up the mortgage application on an individual basis; however, the Mortgage Market Review (MMR) requires lenders to ensure that borrowers do not overstretch themselves and can afford the mortgage.

"When a borrower approaches retirement age lenders have to do additional checks to make sure the mortgagor can afford it on their pension, but more and more people are now choosing to work beyond the state pension age, which may not be taken into consideration. There is clearly a need for the mortgage market to be slightly more flexible towards older borrowers, particularly as so many are now working for longer."

Remember, in order to secure a mortgage, credit card or personal loan you need to have a good credit rating. To find out if yours has a clean bill of health, contact a credit check provider, such as Experian CreditExpert to investigate your credit report.

  • Loans

Many older borrowers can find that their age blocks them from accessing the most competitive personal loan deals, too. "While the more mature borrower will have access to some deals, the very best often escape them," Charlotte pointed out. "For example, four out of the six Best Buys for a £5,000 personal loan over a three-year term have a maximum age ranging from just 60 at the start to 83 at the end of the loan, which means many people looking for a short-term cash injection could miss out on the best rates available."

  • Credit cards

Credit cards don't impose a maximum age as the money borrowed is designed to be used over the shorter term, but many have minimum income requirements – and it's this that could prevent many older borrowers on a limited income from obtaining one.

Five out of the top 10 introductory interest-free purchase cards have a minimum income requirement – some as high as £20,000 per year – which means many older borrowers could be prevented from securing the best deals. As they're likely to have a reduced selection in terms of card availability, it's more important than ever to shop around to get the best one, and hopefully you'll still be able to find a great deal no matter your age.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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