The Financial Ombudsman Service (FOS) has found some mortgage lenders have been applying blanket age restrictions, instead of considering affordability and risk on an individual basis.
The FOS say: “People have come to us with concerns that they have been treated differently because of their age when wanting to move house, when wanting to change the term of their mortgage, and when using property as an investment to boost their retirement income.”
The Ombudsman findings
The report by the FOS, ‘Just a number? Age complaints and the ombudsman‘, looks at several case studies of people who have experienced discrimination from insurers and mortgage lenders because of their age.
- A 70+ couple who were been unfairly given a shorter mortgage term
- A lender insisting to end a mortgage term at the compulsory retirement age
- A retired couple having their request to port their mortgage refused
Income unrelated to ‘retirement age’
The FOS state that household income and the ability to repay debts “aren’t necessarily related to ‘expected’ retirement age”, highlighting that we are working longer after the 2011 removal of a fixed retirement age.
Currently over a million people aged over 65 work, and just under half of us plan to continue working between the ages of 65 and 70, according to the Building Societies Association.
Paying after retirement likely to become the norm
It’s likely many people will be making repayments into their retirement. According to the FOS, over a third of borrowers will be older than 65 when they repay their mortgage.
As of the end of 2014, 56% of first time buyers had between 20 and 29 years to run on their mortgage and 38% took mortgages with a term of 30 years or more.
The rules on age discrimination
The 2010 Equality Act made it unlawful to discriminate on the basis of age, as well as eight other characteristics – disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.
The law recognises two ways age discrimination may occur:
- Direct discrimination – when someone is treated worse than another person because of one of the protected characteristics.
- Indirect discrimination – when an organisation puts a rule, policy or way of doing things in place which has a worse impact on someone due to their age – unless it can be ‘objectively justified’.
However, there is an exception that allows insurers and financial institutions to use age to determine cost and eligibility for their products. But this must be done as part of a risk assessment – making a lending decision based on age alone is illegal.
If you think a risk assessment has not be properly carried out when you apply for a mortgage (or any other form of credit) you have grounds to challenge the decision and should consider contacting the ombudsman.
Tighter lending rules since 2008
After the 2008 financial crash the Mortgage Market Review was brought about to stop high-risk lending and borrowing. The review introduced new lending rules, making lenders more responsible for assessing income and affordability.
As such, mortgage lenders do have an obligation to lend responsibly and your age may remain a limiting factor. Our guide on getting a mortgage when you’re older explains this in more detail.