In the previous consultation paper CP10/16 the FSA proposed that lenders should satisfy themselves, so far as was possible, that it was plausible that the level of income beyond state pension age would be sufficient for the mortgage remained affordable.
For example lenders could confirm that the applicant had a pension provision and confirmed the details by reviewing pension statements.
The issue proved controversial. The consultation paper said: “By suggesting this, we were not expecting lenders to “crystal ball gaze” or predict future events.
“The intention was that lenders take account of known or reasonably foreseeable events from the information available to them at the time they were assessing the mortgage application and we gave retirement during the term of the mortgage as an example.
“We recognise the difficulties in practice of meeting the standards we originally proposed in relation to checking income into retirement.
“Our aim is to protect consumers from carrying forseeably unaffordable debt into retirement. We do not want to prevent older consumers from accessing mortgages where they have the means to support the mortgage.
“So we are proposing that lenders should adopt a prudent and proportionate approach to assessing income beyond state pension age.
“We do not have any objection in principle to lending into retirement and for many borrowers this will be entirely appropriate.”
