Pensioners must take advice before committing to buy to let – ILC-UK
06-14-2015
Mortgage Solutions Hannah Uttley
Older people looking to get a return on their pension savings have been urged to think very carefully before looking to the buy to let market as an investment option.
Speaking at a Council of Mortgage Lenders conference, International Longevity Centre-UK (ILC-UK) director David Sinclair said the industry body should continue to work with mortgage providers to ensure they were equipped to respond to the challenges facing older borrowers.
Sinclair also raised concerns on the recent growth of older people taking out equity release plans to supplement a pension, calling it "potentially very worrying".
He added that lenders should ensure they were not discriminating against borrowers on the basis of age alone.
Despite lending criteria tightening across a number of different requirement types following the credit crunch and Mortgage Market Review, Sinclair argued that this did not fully explain the rising number of people being excluded from the mortgage market because of their age.
According to ILC-UK research published in 2013, one in five (21%) of all households headed by someone aged 50 or over had an outstanding mortgage borrowing on their main home in 2008-10. Its research also found that 13% of all older mortgaged households were struggling to repay their mortgage and more than a third aged over 70 with an outstanding mortgage and an unlinked interest only mortgage.
ILC-UK director David Sinclair said: "We should be particularly worried about those retirees with interest only mortgages but no linked investment.
"While the introduction of "pension freedoms" could be a boon to the buy-to-let sector, older people should make sure they take advice before making the jump. With older people holding almost £1.4tn in wealth in their homes, equity release is going to be an attractive way of supplementing a pension for many," he added.
"The industry needs to ensure that the income poor asset rich pensioners are well served by this market. That said, the recent growth in the number of people aged 55-64 taking equity release is potentially very worrying."