Over 40s frozen out of mortgage market by new lending criteria

By Natasha Adamson

Lenders are warning that the new rules introduced in the Mortgage Market Review in April of this year are locking people in their 40s out of the mortgage market.

The new rules were designed to improve the verification of affordability when assessing a new mortgage application, digging deeper into income and expenses, as well as applying stress tests on how the borrower would cope with an increase in interest rates. However, lenders are saying that they are having to restrict mortgages to people who will complete the mortgage term before they reach retirement age.

A standard 25 year mortgage would not be paid off before retirement if the applicant is in their 40s already, and lenders say they are unable to assess how much income borrowers will have once they retire. The result is that people in their 40s are currently finding it difficult to be approved for a mortgage, and lenders are calling on the Financial Conduct Authority (FCA), the body responsible for the Mortgage Market Review, to provide clarity on the "where the boundaries of responsible lending truly lie".

The Mortgage Market Review is to be reviewed by the FCA early next year, and the Intermediary Mortgage Lenders Association (IMLA) are calling on them to address the issue of borrowers who will retire during the loan term.

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