"Those in their middle age could be worst-affected, as this is the cohort most likely to look at extending their loan term into retirement, possibly for their ‘forever home’."
- Adrian Lowery, financial analyst at Evelyn Partners
Halifax is imposing a new 70-year age limit on the terms of its home loans for some borrowers.
In a note to brokers, Halifax said the change to its criteria would come into force from the 18th of March.
The new age limit applies to remortgage applications with any capital raising or additional borrowing and some purchase and remortgage applications, dependent on credit score and profile.
Halifax said the changes were made as “part of a regular review of our lending criteria and will ensure we can continue to lend responsibly to a broad range of customers”, adding that it would “continue to support the majority of customers” with borrowing up to the age of 75.
From next week, if a term past 70 years is selected for an application, brokers will receive a message at the decision in principle stage stating that, as the term goes into retirement, anticipated retirement income should be keyed in or the term could be reduced.
Halifax originally increased the maximum working age using earned income from 70 to 75 last summer.
Adrian Lowery, financial analyst at wealth manager Evelyn Partners, commented: “Having raised the limit to 75 only last summer, the lender is apparently reining back on lending that is now perceived as risky. For many older borrowers, and particularly those approaching a loan application, this might feel like the goalposts are being shifted back to where they were before mortgage rates started ballooning.
“Some of those who were banking on obtaining or retaining a Halifax loan that allows them to repay past 70 years of age might have to go to back to the broker.
“Borrowers are usually asked when they intend to retire and most lenders have an upper age limit beyond which they are reluctant to lend. Even to take a mortgage term past the state pension age, the lender will often ask for the borrower to explain their future repayment strategy – and lenders would argue this is disciplined lending that prevents people taking on more than they can reasonably expect to repay.
“Nevertheless, tightening up what was for eight months or so a more relaxed approach that afforded borrowers some flexibility to keep monthly repayments down at a time of sky-rocketing mortgage rates, will catch many borrowers off guard.
“Loan rates have retraced a bit but remain high, compared to recent history at least, and this could force many borrowers to reduce the length of their terms in future, increasing their monthly mortgage payments. Marathon mortgages have become popular among many homebuyers in an effort to keep monthly costs down, but those in their middle age could be worst-affected, as this is the cohort most likely to look at extending their loan term into retirement, possibly for their ‘forever home’.
“Beset by a number of financial challenges including high house prices, elevated mortgage rates, the general cost of living, and acting as the bank of Mum and Dad (possibly also caring for elderly parents to boot), the leeway to extend a loan past 70 years has been adopted as a coping mechanism.
“While many such borrowers will be confident that they can either shorten the loan at a later date, or continue repayments beyond 70 - either because they will keep working or have a good pension in place, or both – the Halifax would probably argue that they need to have responsible criteria in place.
“There’s no doubt that as property prices remain very high and as we are very unlikely to return to the super-low mortgage rates enjoyed until a couple of years ago, many households will have to revise either their homebuying demands, their cash-flow expectations or possibly even the date and style of their retirement.”
