Jamie Elvin said it was a concern
Jamie Elvin(Image: Newspage)
A mortgage broker has warned people in certain jobs not to take out mortgages until the age of 75 or even 80, just because lenders will allow them to do so. He said, realistically, a lot of borrowers simply weren’t going to be able to work until that age and their pension provision wouldn’t be enough to cover their mortgage payments.
“I’m increasingly worried about the fact that many lenders, including some high street banks, continue to let borrowers take mortgage terms right up until the age of 80 but are making their decision purely on a person’s current earned income,” said Jamie Elvin, director of London-based Strive Mortgages, which specialises in self-employed and sole trader mortgages.
Jamie continued: “While this can be fine for some borrowers, for example someone who works from a laptop all day and can feasibly continue to do so during their 70s, it is not the case for people in the trades, such as scaffolders, builders, plumbers, painters and roofers.
“Is a scaffolder realistically going to be climbing ladders and doing an extremely physical job until their mid-seventies and beyond? I honestly doubt it.”
Jamie said the reason people extended the term of the mortgage up until age 75 or 80 was because the increased term makes the payments today more affordable, but he warned that a crisis could be incoming if this trend continues.
He adds: “There is a real risk that this is a crisis in the making, up there with the interest-only mortgage crisis, and that we are kicking the can down the road by allowing too many people to borrow for too long.”
Jamie said the theory behind mortgages running up until the age of 75 or even 80 — often referred to as ‘marathon mortgages’ — didn’t match the reality.
He added: “People often assume that, in the final years of their mortgage, their pensions will cover their mortgage payments. But many of the self-employed and tradespeople I advise simply won’t be putting enough into their pensions for this to happen.
“Only last month a report by the Pensions Commission showed that 15 million people are not saving enough for retirement, a figure that could soar to 19 million without action. Basically, millions of Brits are going to be facing a severe income cliff-edge when they retire.”
Jamie said they then had a situation where someone had to stop work because they just can’t do such hard manual work and they don’t have the income to cover the five or even ten years of mortgage payments that remain.
He added: “That’s what a problem looks like. The maths just doesn’t stack up. Why lenders continue to do this is beyond me.”