By 2045 the average life expectancy is predicted to be 92.6 for women and 90.1 for men, with the number of people aged 85 and over forecast to make up 4.3% of the UK population. There are quite a few consequences for society and the economy, but also for individuals.
In reality, this means that a much bigger pension pot is required to live comfortably post-retirement, and as a result, people are having to work or run their businesses for longer to make this happen.
The number of people aged 65 and older working has increased significantly, from 25% in 2000 to 34% in 2023, including those were size or seven-figure incomes. In fact, one in three workers in the UK today are over 50, and this number is also expected to increase in the coming decades as the state pension age is set to increase from 66 to 68 by 2046.
25 years is no longer the standard
For a long time, the traditional length of a UK mortgage, even for the high net worth, has been 25 years, but increasing house prices, which have been outpacing wage growth in recent years, are driving up demand for longer-term mortgages.
Figures from the lenders’ trade body, UK Finance, showed that by the end of 2023, almost one in five first-time buyers were taking 35-year mortgage terms, compared with fewer than one in ten a year prior.
But as you get older, regardless of your wealth it can typically be harder to find banks that will lend for a longer term. Contrary to popular belief there’s no specific maximum age for mortgages believe it or not, but most UK lenders set their own age limit for borrowers. Usually, this is somewhere in the following region:
- Around 55 for taking out a mortgage
- Around 70 for the end of the mortgage term – i.e. when it needs to be paid off by
Whilst it might seem like it, this isn’t necessarily ageism. Lending is all about risk, and if you’re over 50 and approaching retirement, lenders may see you as a greater risk. That’s because once you retire, you won’t receive a regular salary.
Traditionally when assessing your application, lenders look at something called your debt-to-income (DTI) ratio, i.e. the percentage of your income that goes to repaying debts. If your income reduces then the DTI will of course, increase, and that’s an issue.
From their perspective they may be concerned about your ability to afford your monthly repayments if your DTI increases. Of course for high net worth individuals there may be other sources of wealth that will be taken into consideration, some of which that may increase in value.
But either way every lender, even boutique and private banks, will have one eye on your future earning potential and asset base.Even if you'll be getting a sizeable pension once you retire, most are likely to see a drop in income.
Therefore, if your mortgage loan term runs into your retirement years, the lender may require evidence that your pension income and wider assets are enough to meet your repayments after you retire.
Plus from many perspectives this risk increases for the high-net and ultra-high-net-worth, because the loss of income on retirement can sometimes be much more significant, as well as typically dealing with much higher property values.
As a result you may find that a lender will to offer a mortgage does so at a higher rate, or expects a greater deposit than usual, because of those additional risks involved.
Why are more people over 50 taking a mortgage than ever before?
Securing high value finance for older borrowers is almost always problematic. And yet people of all ages still need mortgages for various reasons. People are getting married and having children much later in life generally than ever before, with many people deciding to wait to purchase a home until they have reached a certain earning threshold which could also include the security of two sizeable incomes.
The most common age for divorce in the UK is 40-44, with nearly 80% of first time divorcees going on to marry again, which means more people are having families later in life, or even second families; buying dream family homes, investment properties or second homes much later.
The rising cost of housing at all levels can also mean getting on the property ladder much later on, after saving for a deposit or awaiting an inheritance. In many instances even high net worth individuals delay purchase, as they await the wealth required to buy the trophy property they have set their hearts on, typically renting in the interim. Plus, as we’ve already discussed, the age of retirement and state pension age are both increasing.
Another reason is that often people have a desire to relocate or buy their dream property as they approach retirement, no longer is this a time for retrenchment and tightening. After all, you’ve worked hard all your life, so why shouldn’t you retire in style? And whilst downsizing may be an option for some, not everyone wants to do so.
So where can I find a million plus mortgage over 50?
Enness are experienced in sourcing finance for older borrowers, so we know which private banks and lenders to approach and we can use our lender relationships to negotiate effectively on your behalf. As mentioned defaulting to the lender you bank with, or relied on your whole life is rarely the best way to get the best terms for your needs.
We understand that high-net-worth individuals may often be asset rich but cash poor, or have unusual income streams, and we have experience of tailoring applications which take into account your entire portfolio.
Our extensive experience in this area means we can make a case to highlight your strong financial credentials even where there’s a lack of ‘mainstream’ income, leveraging all aspect of your portfolio including your assets and investments.
Our goal is simply to help lenders view you in the best possible light when assessing risk.
To find out more about high-net-worth mortgages for over 50’s please contact Islay Robinson, [email protected].
The views and opinions expressed in this piece are those of the author and do not constitute advise or a recommendation. They do not necessarily reflect the official policy or position of Enness and are not intended to indicate any market or industry viewpoints, or those of other industry professionals
Islay Robinson, a founder of Enness, is widely regarded as one of the UK's leading mortgage brokers. He has been instrumental in delivering some of the most complex and high value mortgages in the UK.
