Elderly being rejected for home and personal loans, says broker
Banks are discriminating against older Australians by turning them down when they apply for home loans, personal loans and credit cards, says mortgage broker Julian Finch.
The managing director of brokerage Finch Financial Services, based in the Hurstville, Sydney, has spoken out about the behaviour of some banks, saying an increasing number of elderly people couldn’t get a loan because of their age.
“It is unethical of banks to discriminate against older Aussies who are financially more stable,” Finch said. “This practice is becoming more commonplace but it’s absolutely abhorrent that they’re not approving credit cards and loans for retirees.”
Finch (pictured above) has been a mortgage broker for almost nine years. Finch Financial is a family business – Julian’s wife Nicole Walton runs Finch Asset Finance, and his mum Maureen Finch manages the office.
Bank practices hurting older Aussies
Finch acknowledged that Australia has an ageing population.
“By 2026, more than 22% will be aged over 65 years old, up from 16% in 2020, which was already double the figure of 8.3% at the start of the 1970s,” Finch said.
“Obviously, the bank doesn't necessarily decline [a loan] based on age, but certainly some of the mechanisms in their loan policy make it quite clear that that's what they're doing.”
Finch said banks turn down applications for credit cards, home loans and personal loans by older people for a number of reasons. These included the fact that they were retired and didn’t have a job “and the regular income that comes along with having a job even if they have substantial investments and few debts”.
“Secondly, they are seen as a higher risk because of their age and potential to become sick or even die.”
Finch said government-funded retirees, or pensioners, were unable to secure a loan.
“Of course you’re still eligible for a government pension if you have an owner-occupied property. If you have debt remaining or if you need to do renovations, then it obviously makes it really difficult to qualify for any type of lending given the fact that type of income is excluded from most lenders’ servicing. ”
Self-funded retirees are able to access loans, particularly for an investment property because there’s an easy exit strategy, said Finch.
“But if you're an older person and it's your owner occupied property, and your only source of income is a government pension, you've got virtually no chance of getting a loan.”
Finch was also aware of a lender that wouldn’t consider providing owner occupier loans for people over a certain age. “It doesn’t matter how wealthy you are or how many income streams you’ve got, as soon as you get to a certain age, they basically just shut the door.”
Case study
Finch talked about an elderly female client of his who had been unable to get a better rate on her high interest home loan due to the actions of one of the big four banks.
“She owed $110,000 on a line of credit facility – this was back in Covid, when the interest rates were very low,” said Finch. “It was an old facility and she was getting charged about 7.5% interest.”
“I couldn’t do a product swap, I couldn’t get their complaints team to do any remediation. They insisted on a full assessment to change the loan product.”
Finch said his client was paying interest-only at 7.5% and he wanted to switch to a P&I facility with an end date, which would save her about 5% interest on the debt.
“Nobody would touch it, nobody in the bank would do anything for her.”
Despite making a complaint to the bank, Finch said unfortunately he was unable to help his client. Even attempts to refinance to other banks were unsuccessful, with no other institutions willing to accept the loan.
He said bank policies and responsible lending practices probably prevented banks from being able to take on the loan.
However, this older client on a limited income had a perfect repayment history over a long period of time. Finch described his client as a victim of circumstance “caught on an obsolete loan product.”
“Lenders change their products and discontinue certain types of loans and then they [get] caught up in this sort of limbo because the bank doesn't service that facility anymore and it just sits there on their system as a legacy product and of course the pricing just gets out of control,” Finch said.
“In my mind it was unfair that the bank didn’t actively seek to change her loan product to something that was more suitable.”
Finch said under responsible lending rules, a sentence was required to be written on the loan which said “this product is not unsuitable for this customer”.
The loan for his client was clearly unsuitable, given the interest rate, the product was no longer part of the bank’s product suite, and the fact that by switching to a different product it would be far better for the customer.
“When you can demonstrate quite simply that someone is in a better position by changing their loan product, there should be an exemption to the rules around responsible lending.”
Credit cards, personal loans
Banks are also turning down credit card applications for older people because most retirees pay their cards back before the due date and the banks don’t earn any interest, said Finch.
“When someone else younger comes along and is more likely to only be able to meet the card minimum repayment, the bank knows that they’ll earn a quick buck or two from this person, so they’ll approve that person’s application for a credit card.”
Finch said when it came to older people securing personal loans, it depended on the type of income the lender was willing to accept. “So if you exclude the government pension, you’re excluding that type of borrower.”
How can brokers make it work
Finch said there was a misconception among some brokers that it was impossible to get loans for older people.
“You’ve got to be switched on and know how to present it to a lender and make sure that they're comfortable with it.”
Different lenders had different policies and it was important to demonstrate a good exit strategy and servicing.
Finch also had some advice for older borrowers: “To avoid age discrimination, find a good broker. A broker with plenty of experience will match you to the right lender ensuring your age does not impact your financial borrowing outcome.”
