In a significant announcement this morning, TSB has unveiled some new lending criteria, aimed at helping individuals secure mortgages into retirement. The new policy reflects the shifting dynamics of the housing market and the growing demand from people looking to extend their homeownership journey beyond traditional retirement limits. Let’s take a look at what exactly TSB have changed, and why borrowing past retirement age is becoming more and more appealing to the British public.
Borrowing Mortgages Into Retirement
When thinking about mortgages, most people will know that the traditional mortgage model was structured around the expectation that borrowers would clear their debts by the time they retired. Finish work with a pension income and a house that you already own outright…right? However, the property market dynamics and the rising cost of housing have pushed many individuals to consider extending their mortgage borrowing well into their retirement years. The reasons for this shift are numerous, and TSB’s new lending criteria acknowledge these evolving trends.
TSB’s Vision for Borrowing into Retirement
This morning, TSB announced in an email update to brokers that they would be introducing some key changes to their stance on mortgage borrowing into retirement. Under the new lending criteria announced, TSB is offering two distinct pathways for borrowers, depending on the number of years they have until retirement:
Borrowers with More than 10 Years Until Retirement:
For individuals with more than a decade left until their retirement age, TSB will now enable borrowers to secure a mortgage without the requirement of providing proof of anticipated pension income. Instead, they are only expected to demonstrate their commitment to saving for retirement by actively contributing to a private pension plan. So, for example, if you are 50 years old and are due to retire at age 70, as long as you can show that you are actively contributing to a pension plan, then you can extend your mortgage past your retirement age. Limits will still apply, depending on how long you want to take the mortgage for.
Borrowers with Less Than 10 Years Until Retirement (or Age 70)
For those with less than a decade remaining until retirement, or if the age of 70 is the lower threshold, TSB will require a pension forecast to support affordability. This ensures that borrowers have a clear financial plan in place as they approach their retirement years.
Why Do People Take Mortgages Past Retirement Age?
There are several factors that are driving the increasing interest in borrowing into retirement amongst the UK mortgage market:
- Rising Property Prices: Although average property prices have stalled in the UK recently, they are still much higher than they were 10 or 20 years ago for example. Escalating property prices in many regions have made it increasingly challenging for buyers, even with stable incomes, to afford homes without extending their mortgage terms. Having the option to take a 20 year mortgage rather than being limited to a 15 year or shorter mortgage in older age can mean that you are able to buy your dream property and not struggle to pay for it per month.
- Changing Retirement Age: The traditional retirement age of 65 is no longer the standard, with many people choosing to work well into their 70s or beyond. Of course this is not always the case for people who have demanding physical labour jobs, but office based or desk based jobs can certainly work past the age of 65. This has made it necessary for financial institutions to adapt their lending criteria accordingly and has lead to an increase of people borrowing mortgages past traditionally held retirement assumptions.
- Low-Interest Rates: The historically low-interest rates make long-term mortgages more attractive, as the cost of borrowing remains relatively low over extended periods.
- Flexibility in Retirement Planning: Borrowing into retirement can enable people to manage their finances more flexibly. They can invest in other financial assets, contribute to retirement accounts, or make additional mortgage payments as their financial situation allows.
- Realizing Homeownership Dreams: Many people are now seeing homeownership as a lifelong dream rather than a milestone to achieve before retirement. The average age of a first-time buyer in London is creeping up and up with it currently standing at around 35 years old. However, people are delaying buying for longer with the goal of eventually purchasing. Whatever age that might come at. With the right support from banks like TSB and the right retirement mortgage broker, this dream can become a reality.
TSB’s New Retirement Criteria And It’s Impact On Borrowers
TSB’s new lending criteria provides borrowers with the flexibility and peace of mind they need to make homeownership more achievable. By extending the maximum age for mortgage lending and streamlining the application process for those with more than 10 years until retirement, TSB is making it easier for people to access the housing market, even in today’s competitive environment. It is however, essential to note that while TSB’s new criteria can offer greater flexibility, responsible borrowing remains the most important thing to consider. Borrowers should always speak to a qualified mortgage advisor who will help them to consider their financial circumstances and long-term plans carefully. A mortgage that extends into retirement should ideally align with the borrower’s financial goals, ensuring they can comfortably afford their loan while still achieving their retirement plans. With something as important as a mortgage and your retirement, you can’t afford to make any mistakes.
If you or anyone you know is looking to extend their mortgage into retirement or get an entirely new mortgage, we are here to help. Call our team of expert mortgage brokers today to see how we can help you.