The removal of the default retirement age (DRA) is likely to have an impact, not only on the way people plan for the latter part of their life financially, but also how mortgage lenders view the terms of their mortgages.
Many lenders will not allow borrowers to extend the term of a mortgage beyond the age of 65, but according to Sue Anderson, speaking on behalf of the CML (Council of Mortgage Lenders), this train of thought is already being addressed in conjunction with the FSA’s review of the mortgage market.
First Direct and HSBC have already said they will allow repayment mortgages to extend beyond the normal retirement but in return will want more detail on the pension funds and financial prospects of the borrower.
If other lenders adopt a similar stance, then this could reduce the growing popularity of equity release deals – mortgage advisors need their CeRER training and qualification in order to advise on these.
Employees will also be able to choose their own retirement date rather than have one forced upon them. Many hope this will encourage better retirement planning, as people’s take more responsibility for their choice of when and if they can afford to retire.
The DRA is expected to be phased out by October this year, as pledged in the coalition agreement. There may still be exceptions for some groups of workers but pressure is on to ensure that age is removed from the equation altogether.
How the mortgage market will react and how the mortgage deals will alter remains to be seen but as those studying their CeMAP training to become a mortgage advisor will quickly see, the mortgage market is always evolving.