"Extending a mortgage term past state retirement is not a decision that should be taken lightly but is what many are doing at the moment to make their monthly payments more affordable"
From tomorrow, 1st August, Halifax is increasing the maximum working age using earned income to age 75.
Newspage asked brokers what impact will this have on the mortgage market, whether the industry will see a surge in people remortgaging due to the rise in interest, and what the risks are of taking a mortgage to the age of 75.
Craig Fish, director at Lodestone Mortgages & Protection: "This is long overdue from the UK largest lender and brings them into line with most others in the industry. In this day and age, it is more common for people to work beyond state retirement age. Furthermore, people are coming onto the property ladder, especially in London, at a much later age so having the option of a longer mortgage term opens up more options for borrowers, which can only be a good thing. Of course, it's riskier having a mortgage at this age, but as long as the client has received proper advice and understands the implications it isn't an issue. Well done Halifax."
Lewis Shaw, owner and mortgage expert at Shaw Financial Services: "Halifax has been an outlier in this area for a while, given its size. However, it's a welcome move by one of the biggest mortgage lenders in the UK. This will likely see them increase their market share just by adding this one piece of lending criteria. However, anyone considering taking a mortgage past the state retirement age needs to think carefully about the sustainability of paying a mortgage up to age 75. When consumers are in their 30s or 40s, they may feel as though working until 75 is achievable, but speak to anyone that is that age, and you'll likely hear a very different story."
Gary Bush, financial adviser at MortgageShop.com: "This is great news and is often a concern to us with applicants as the UK general public are all clear in their mind that they will sadly be working until at least 75 now and so why should the largest mortgage lender in the UK have been restricting their repayment terms until age 70? The large majority of UK lenders now have good flexibility in acceptable repayment ages and Halifax has now slotted into this."
Riz Malik, founder and director at R3 Mortgages: "Lenders primarily vie for business using two tactics: interest rates and terms. No one wants to compete on interest rates, and Halifax has recently made beneficial changes to their terms. This strategic shift is astute, given the present circumstances, and will undoubtedly boost their business activity, even amidst these challenging times."
Ashley Thomas, director at Magni Finance: "This is in line with a lot of lenders and is sensible as a significant percentage of people these days are working up to age 75. This doesn't stop people from overpaying and paying off the mortgage before age 75 if they are able but it can help reduce the monthly cost with a longer term."
Chris Sykes, technical director and senior mortgage adviser at Private Finance: "This is bringing Halifax in line with many of their competitors with the likes of NatWest changing these criteria last year and HSBC, Nationwide and Santander amongst others having it for years. Extending a mortgage term past state retirement is not a decision that should be taken lightly but is what many are doing at the moment to make their monthly payments more affordable, hopefully as a temporary measure and the mortgage can be paid down quicker with overpayment or a remortgage at a later date."
Scott Taylor-Barr, financial adviser at Barnsdale Financial Management: "This isn't quite as scary as it first sounds. The retirement age of 65, for men at least, was set back in the 1940s when the average life expectancy was under 70, so retirement would last around 5 years. Life expectancy is now around 80, but with the retirement age only edging up to 68, that leaves us with 12 years of retirement to fund. Many people are simply not saving enough to fund a retirement of that length and so the only option is to remain in some form of employment. This could be part-time to supplement their pension income rather than full-time, but it is more and more likely that people will need to have an earned income later in life; so Halifax, as with many other lenders, is only amending their criteria in line with how their customers working lives are evolving."
Gareth Davies, director at South Coast Mortgage Services: "This is a good move from Halifax, and brings them into line with the majority of other high-street lenders. Known in the industry as a 'no fuss'-type lender, this has been one element of their criteria that we brokers have wanted for a while. It won't see a surge of new applications, but having the choice to go beyond 70 is something that a lot of people want to consider. I also like the fact they want the client to sign a form to evidence they are aware of the risks of doing so. A wise move in our current 'compensation culture'."