Leeds Building Society loosens lending into retirement criteria

Leeds Building Society has loosened its lending into retirement criteria by increasing its maximum term from 25 years to 40 when a customer borrows past their stated retirement age.

Borrowers who are within 10 years of their retirement age, or whose loan extends more than five years into their retirement, will be underwritten on the lower of current earned or future pension income.

Affordability for borrowers with more than 10 years to their stated retirement age will be assessed on their current income. For example applicants under 60 years old intending to retire at 70 will be assessed on current income, where the loan does not extend beyond age 75.

Richard Fearon, Leeds Building Society’s chief commercial officer, said: “The age at which people now step onto the property ladder is increasing so logically their age at the end of their mortgage may also be higher.

“There’s also greater flexibility over when people choose to retire, which can affect their ability to pay for a mortgage.

“The new pension freedoms mean more choice about when to access a savings pot but most people don’t decide how to use their retirement fund until close to the time they stop work.

“As the UK population ages and life expectancy increases, this market is only going to grow and lenders need to address the changing needs these demographic shifts are creating.

“These changes include younger borrowers choosing a longer-term, which means their mortgage could continue into their 60s or 70s.

“We’re responding to this changing demand and behaviour – as we did when we increased our maximum age for residential borrowers from 75 to 80.”

The Council of Mortgage Lenders (CML) regards any mortgage which extends beyond the borrower’s 65th birthday as lending into retirement.

In 2015 more than a third (35%) of all new residential lending was in this sector.