As the population gets older and the average age of first-time buyers increases, the probability of needing a mortgage that goes beyond traditional retirement age is increasing. But this is something that could hinder getting a mortgage in the first place.
A recent survey by the Building Societies Association (BSA) found that around half of those aged around 25-34 years old thought they would need a mortgage that lasts into their work-free years. However, over a quarter of this group (27%) fear that they may struggle to get a mortgage that does this – a fear that is not altogether unfounded.
Recent years have seen the average age of first-time buyers steadily increase, which subsequently pushes the end of a mortgage term closer and closer to retirement age. However, many lenders still impose an upper age limit, which means that those who need a mortgage into their later years may face rejection.
Matters are not helped by the strict criteria imposed by the Mortgage Market Review (MMR). The tighter regulations on affordability mean that some borrowers may be facing longer repayment terms, and when combined with the rising ages of first-time buyers, this could mean that more mortgages are bound to run into retirement.
"We are all now living much longer and getting on to the property ladder later in life," commented Paul Broadhead of the BSA. "As the average age of a first-time buyer increases, borrowing into retirement is becoming the 'new normal', rather than a niche form of lending."
Clearly, the market needs to start adapting to the changing demographic of first-time buyers in the UK, otherwise a growing number of people could find themselves unable to purchase their dream home. "The Government, regulators and the financial services sector need to cater for this change," argues Paul. "Paying off a mortgage by the age of 65 is no longer a reality for many."
If you are in the 25-34 age bracket, things may not sound so positive right now. However, not all is doom and gloom. There are some lenders that have no upper age limit, you just have to search the market and find them!
You can also reduce the length of a prospective mortgage by making yourself a good prospect from a lender's point of view. A good credit history, a demonstration of careful budgeting and a healthy savings habit can all help you to pass the new regulations with flying colours. And if you show you can afford it, you could then opt for higher monthly repayments over a shorter term.
Gathering together the best possible deposit you can afford can also keep mortgage repayment terms down, as the more you can pay off upfront, the smaller your loan will be. Setting up a regular savings account can be a great way to start building that deposit fund – the regular payments will get you into the savings habit, and you can often secure a better return than you would with an easy access account.
So, if you are thinking of getting onto the housing ladder, start preparing today and give lenders no opportunity to turn you away!
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