83% of over 55s can't access any later life mortgage: Responsible Life

Responsible Life says affordability criteria that fail to treat pension drawdown as income and rely solely on the lower guaranteed income of a surviving spouse are "largely to blame".

The findings stem from analysis of data collected by the Retirement Mortgage Service (RMS), Responsible Life’s pilot project to create the UK’s first all-product, whole-of-market retirement mortgage broker.

The aim of the pilot was to identify areas where the retirement mortgage market could better serve consumers. Analysis of RMS data has now revealed that 82.8% of over-55s who needed a mortgage or remortgage didn’t qualify for any product of any kind.

As only the guaranteed income of a surviving spouse can be taken into account for retirement interest-only affordability tests, Responsible Life found that many retirees are attempting to borrow at ratios of more than ten times their guaranteed income, suggesting there is still a lot of confusion about how affordability in the later life lending market works.

Similar challenges are posed by lifetime mortgages. As these products come with the ability to defer and roll-up the interest, they necessarily offer lower LTV ratios, so many consumers aren’t able to access as much finance as they expect.

Steve Wilkie, executive chairman of Responsible Life, said: “Retirees are being frozen out of the mortgage market because they are being sabotaged by affordability rules that are not fit for purpose.

“Retired borrowers should be allowed to show a greater variety of repayment strategies to unlock lending in later life. These should include plans to downsize, pension drawdown and reverting to lifetime mortgage products at the end of a mortgage term.

“Such flexibility would be in the spirit of other financial innovations that have sought to make it easier for the over-55s to navigate retirement, namely pensions freedoms.

“The interaction between products and their features in the later life lending market must be urgently addressed if they are to meet societal needs. The country would feel a net benefit from improvements in these areas.”