Regulation round up August 2015

Rumours abound that interest rates will rise in the near future and this has led to a remortgaging scurry.  Meanwhile, older borrowers may have difficulties finding affordable long term deals. 

Low interest rates encouraging borrowers to remortgage

Notable this month is the uptick in remortgage activity among home-owners, perhaps reflecting an increased desire to lock into competitively-priced mortgage deals in advance of any rise in rates. It is likely that people are now beginning to feel a rate rise is a realistic prospect and not just a distant theoretical possibility. CML Director General Paul Smee

Recent figures from the Council of Mortgage Lenders show remortgage lending was up 34 per cent year-on-year to £5.1bn. CML attributes this surge in remortgaging to current low interest rates and the fear of a rates rise.

Major lenders still hesitant to lend to older borrowers

Mortgage Strategy reports on concerns that older borrowers face barriers when trying to access mortgage products. With recent UN statistics predicting a sizeable increase over the next 20 years of the number of over 65s in the UK from 18% of population to 23%, the needs of the older borrower cannot be ignored.  Furthermore the number of over 65s in employment has doubled to 11% yet it seems major lenders are hesitant to lend to older clients. 

The Mortgage Strategy article points to recent information from the Council for Mortgage Lenders showing an increase in the number of 30 and 35 year mortgages that can extend past the borrower’s 65^th birthday.  The majority of these products appear to be offered by the smaller building societies.

There are concerns that a restrictive interpretation of the Mortgage Market Review may be behind the hesitance to lend to older borrowers.  Lenders will be keen to avoid accusations of irresponsible lending and subsequent redress.

The Mortgage Market Review states “Lenders must consider whether the borrower can continue to afford the mortgage following a known change in their income, such as retirement. Our aim is to prevent unaffordable lending in retirement, not to prevent all lending into retirement.”

Mortgage affordability should be assessed on a case-by-case basis. With limited access to affordable borrowing older clients may find themselves pushed towards more expensive products, such as equity release.