Homeowners who want to borrow into their 80s now have more choice than ever before.
Five years ago there was not a single mortgage that allowed borrowers to repay their debt between the ages of 80 and 84.
But following a sharp increase in demand from older borrowers, there are now more than 1,000 up for grabs, according to data analysts Moneyfacts.
Five years ago there was not a single mortgage that allowed borrowers to repay their debt between the ages of 80 and 84. There are now more than 1,000 up for grabs
In the wake of the financial crisis, the City watchdog introduced strict new rules to curb risky lending.
In response, banks cut back on the number of mortgages they offered to borrowers over the then-state pension age of 65.
It meant that even with pension income to support the mortgage payments borrowers would struggle to persuade a bank to offer them a loan into their 70s.
But times have changed and there are now only 18 mortgage deals with a maximum age restriction of between 65 to 69, compared to more than 900 in 2014.
Darren Cook, finance expert at Moneyfacts, says: ‘Over the past five years, mortgage providers have become far more accommodating to borrowers who wish, or may have no alternative but to extend their mortgage term well past the official pension age.
‘The scaling back of strict criteria around the maximum age at the end of a mortgage must be a welcome relief for those borrowers who may have reached the end of their mortgage at 65 on an interest-only mortgage and have had few options available to turn to.’
Experts say the charge is being led by building societies, with many big banks remaining conservative.
There are eight societies, including Nationwide, that lend to borrowers aged 85 at the end of the mortgage term.
And, 16 societies including Ipswich, Tipton & Coseley, Marsden and Penrith, have no upper age limit at all but instead impose a maximum term.
For example, Ipswich Building Society has a 40-year term, so if you were 70 when you took out the mortgage you could technically borrow until you are 110.
There are eight societies that lend to borrowers aged 85 at the end of the mortgage term. And, 16 societies have no upper age limit at all but instead impose a maximum term
Many of the lenders opening their doors to older borrowers offer very competitive rates.
Nationwide, for example, currently offers one of the lowest five-year fixed rates on the market for borrowers with a 40 per cent deposit.
At 1.89 per cent the monthly repayments on a typical £150,000 mortgage are £628. The total cost including £999 fee is £38,679.
Andrew Montlake director of mortgage broker firm Coreco, says the explosion of mortgages to older borrowers is a reflection of modern attitudes to working.
‘Lenders have responded to the reality that we have an ageing population, people are working longer and are healthier later in life,’ he says.
‘Not everyone has a strenuous job they can no longer carry out in their 70s and some people prefer to stay active and sociable by staying in work.’
Mr Montlake says he receives at least one application every week for a loan that ends when the borrower is in their mid-80s.
Reasons for borrowing range from repaying an interest-only mortgage, providing an early inheritance to children, or carrying out home improvements.
The arrival of interest-only retirement mortgages
But increasing or removing upper age limits isn’t the only revolution in mortgages for older borrowers.
From March 2018, the regulator gave banks and building societies the green light to offer interest-only mortgages to borrowers aged 55 or over with no end date.
The monthly repayments on these so-called retirement interest-only mortgages can be much cheaper as borrowers only have to repay the interest on the mortgage.
The balance of the loan does not need to be paid back until the homeowner dies or goes into long-term care.
The most well-known lender to offer a retirement interest only mortgage is Leeds Building Society. For borrowers with a 45 per cent deposit, Leeds is currently offering a two-year fixed rate of 3.65 per cent.
The monthly interest payment on a £150,000 mortgage would be £456. The total cost including a £999 fee is £11,943.
Another option for homeowners aged 55 or over who want to release cash from their homes is equity release.
With this type of deal borrowers do not have to make monthly repayments. Instead the interest can be rolled up and the debt repaid when the homeowner dies or moves into long-term care.
The average equity release mortgage rate is 5.21 per cent.
Rise of the garden annexe
Three and four-bedroom homes can command asking prices up to 27 per cent higher if they have an annexe
More homeowners are building annexes in their gardens rather than moving to larger properties, research suggests.
Around 10,000 planning applications are made every year, and there was a 5 per cent increase in the number of successful submissions between April 2015 and March 2018, according to research by insurer Churchill.
The annexe has traditionally been used as a home for older relatives, but they are increasingly built for garden office space for those working from home.
The figures mean one application for a new or converted garden annexe is submitted in the UK every 53 minutes.
And 82 per cent of all these applications are successful.
The rise in applications may also be down to homeowners recognising the value they can add to homes.
Churchill found that three and four-bedroom homes can command asking prices up to 27 per cent higher if they have an annexe.
Last year 7,000 households applied to have new garden annexes built, and 5,700 were successful, according to data obtained by Freedom of Information requests sent to 392 local councils.
A further 2,800 applications were submitted to convert outbuildings or sheds into annexes — 2,400 of these were successful.