Abbey for Intermediaries released the following statement yesterday: “We have updated our lending guide to show that evidence is required for both current and retirement income on all applications where a mortgage term goes beyond the applicant’s stated retirement age.”
Basildon-based retired broker, Danny Lovey, said the changes implied Santander was acting on Mortgage Market Review proposals still in consultation.
He said: “This is stark staring bloody bonkers. Where is there any element of common sense on this? Lenders are running scared of what is contained in the MMR and the paranoia the FSA has created in CP 10/16.
“Asking for proof of income in retirement if you’re ten years away from retirement is one thing, but what if you’re twenty three years away? It’s impossible to predict income that far in the future.”
Lovey gave the example of a man aged 45 who wants a 25 year mortgage until he is 70 and tells the lender his retirement age will be 67. Under the changes, AfI would expect this borrower to provide evidence of expected income 22 years from now.
But, said Lovey: “The chances are he really wants to pay the mortgage off by the time he is 60 if he stays in the same property, but is just giving himself a comfortable amount of room for making it more comfortable and say make overpayments when his boat comes in, bonus, inheritance all sorts.”
Santander sought to clarify the changes today, which it said were not as hard and fast as this example suggested.
Iain Laing, chief credit officer at Santander, said: “This update is not saying that we are going to try to prove or disprove retirement income in every case. The choice we make about how far we go into exploring it depends on how close the applicant is to retirement.
“This is more a general statement around borrowers explaining how they plan to fund a mortgage into retirement if they want to borrow into retirement. It’s then our job to judge how far to go in verifying this as it can be very hard to prove repayment vehicles’ performance decades into the future.”
Lovey remained concerned that lenders were acting as if the MMR proposals were already set in stone, when the consultation does not close until next Tuesday.
He said: “The whole thing has to be proportionate and degree of common sense has to be used. It seems a lot of lenders are falling over themselves to fall in line with what’s in a consultation paper as though it’s a done deal.”
Speaking at yesterday’s Mortgage Business Expo, Iain Laing told brokers that the industry still had “everything to play for” in arguing its case against some of the MMR proposals, many of which he said went too far.
Brentchase Financial sales director, Mike Fitzgerald, said: “It’s not big news to us that lenders are asking how borrowers will pay their mortgage into retirement – it’s reasonable really.
“We’ve been mentioning payment strategies into retirement in suitability letters for about 18 months now. If the mortgage goes into retirement by one or two years it’s not a big deal really, but there has to be a reasoning behind taking a mortgage into retirement for a length of time. Borrowers must have a payment strategy or exit strategy.”
