Britain’s property prices are so high and wages are no rising fast enough meaning that it’s taking longer for people to get on the property ladder.
With this in mind, UK lender Nationwide is raising its age limit for people paying off their mortgages by 10 years to 85-years-old.
But considering the average life expectancy for people in the UK is at 81-years-old, it means Britons are more likely to die before they can pay their mortgages off.
“Access to the mainstream market has been a challenge for older customers, resulting in their needs going unfulfilled. This measure helps to address these needs in a prudent, controlled manner,” said Nationwide head of mortgages Henry Jordan in a statement.
The new Nationwide age limit comes into force in July, meaning those at 60-years-old can take out a 25 year mortgage. Last week in May, Halifax also increased its age limit for mortgages from 75 to 80.
Other lenders provide lower age brackets, maybe because of the life expectancy issue.
Santander cuts off the mortgage lending age to 75-years-old while Barclays has an upper age limit of 70. The Royal Bank of Scotland’s upper age limit is 70 while HSBC it reviews applications of those over 75 on “a case-by-case basis” in lieu of a set upper age limit.
Basically, people are becoming a lot older before they can afford to get on the housing ladder and now lenders are trying to up the age limits so people in their 50s and 60s have a chance of owning their own home.
The average price to buy a house in Britain now stands at £291,504, according to the Office for National Statistics. Meanwhile, the average London property price is at a huge £551,000.
To put this into perspective, thinktank Resolution Foundation estimated last month that median income for the average Brit was at £24,300 — only around 3% higher than it was when the credit crunch hit in 2007/2008.
Usually, people need to stump up a deposit of anywhere between 5% to 20% of the asking price of a property before a bank will grant you a mortgage. The greater the percentage the borrower puts down as a cash deposit, the safer the mortgage likely is — because a deposit says something about the ability of the borrower to come up with cash if need be.
Under Nationwide’s new upper age limit bracket, the maximum loan size would be at £150,000 and be worth no greater than 60% of the property value.
People are not earning enough to keep up with rising house prices and Resolution Foundation data shows that lower- and middle-income households are spending 26% of their salaries on housing, compared to 18% back in 1995. In London, households spend 28% of their income on housing.