Helen Pierson, principal at Halcyon Mortgages, contacted Mortgage Introducer about the ‘unworkable’ criteria lenders seem to be adopting concerning lending into retirement, citing Halifax as the main culprit.
She explained: “At the ‘eleventh hour’ Halifax asked for evidence of pension income plus tax-free lump sum for a client currently aged 52 wanting a 23-year term. I told Halifax my client was a prison officer with 13 years’ service remaining; he was in an occupational final salary pension scheme and as such it was impossible to accurately project forward to provide the information required. In addition he intends to sell the property upon retirement and move downmarket.
“ Halifax wouldn’t budge and it was only upon speaking to our area rep that I realised just how ridiculous Halifax’s stance is. It assumes the pension pay-able at retirement is whatever it is at current rates, regardless
of the type of pension scheme and number of working years remaining before retirement occurs.”
Pierson said in her client’s case the debt would potent-ially have reduced by £36,000 (taken from Halifax’s Amortisation Table on the KFI) by the time retirement took place but the calculation used expected him to service the full mortgage based on a pension at today’s rates, regardless of the fact that he has a further 13 years’ service to complete.
“It may not surprise you to learn that it didn’t fit,” she added. “We all know that mortgages into retirement are a bit of a ‘hot potato’ for the FSA and as such for lenders too which is why a common-sense approach needs to be adopted.”
Paul Fincham, spokesperson for Halifax, said: “We have to be cautious when lending into retirement. Yes, we require additional information and documents but that’s the right and proper thing to do.”
