Some older ladies have problems with interest only mortgages (stock)
Her problem centres on the £160,000 interest-only home loan she took out 12 years ago. She is one of tens of thousands of people who count themselves as “mortgage prisoners” affected by stricter lending criteria brought in after the last financial crash to cut defaults, leaving some trapped in expensive deals unable to switch. Others like Miss Osner have been prevented from re-mortgaging.
Despite having an exemplary payment record, her self-employed status and earnings assessed on income after tax, compounded by her age, 65, means she falls short of those stricter affordability rules now in place.
Miss Osner’s loan will reach its term in July.
Her desire is to carry on as before with an extension, eventually using the equity or value the property, currently worth 50 percent more than what she owes, to pay off the loan when she does move or passes away.
To have to leave my house would break my heart
“Since taking out the loan, which was one of the self-certified ones no longer available, my circumstances have changed,” she explains.
“I expected to be receiving a state pension by now, but I am one of the many women who lost thousands of pounds when they raised the pension age.
“I was also the carer for my mum who had Alzheimer’s Disease. Now assessment is on my income after tax and so is much less. It’s a perfect storm.”
It was only after asking her lender, the Bank of Scotland, part of Lloyds Banking Group, about extending for another five years that she realised the problem.
“With an extension the terms for my obtaining equity release would improve and the value of my home is likely to increase so I would be in a much better position,” she adds.
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However the offer Miss Osner has received is for a six-year mortgage on a part-repayment basis at a cost of £1,300 a month, double what she currently pays.
That prompted her to ask Crusader for help.
“I can’t afford that,” says Miss Osner, “but with another solution, we would all win. I could keep my home until I had more options and they would keep their customer.”
Lloyds is now reviewing the matter and said: “We have been working with Miss Osner to discuss what options are available to her based on her individual circumstances.
“We do all we can to support our mortgage customers and encourage those who want to look at their options for the end of their term to contact us as early as they can so we can discuss with them in branch, by phone or online.”
What are the options for “mortgage prisoners” and could Retirement Only ones be a solution?
The regulator has altered rules to help mortgage prisoners move to a cheaper provider. “However lenders are not compelled to use this option,” advises David Hollingworth, the associate director of broker L&C Mortgages.
“Although smaller lenders like Beverley and Ipswich building societies have developed some more flexible options, and Nationwide recently reduced its stress rate for like-for-like borrowers as well which should make it a little easier to meet criteria, it has yet to pick up momentum.
“Lenders will offer mortgages that extend beyond retirement age but will need to see that income will be adequate then.
“Retirement Interest Only (RIO) mortgages are a relatively new type of mortgage that could offer an option.
“They are designed for older borrowers and essentially offer a standard interest-only mortgage but instead of imposing a specific term they will run until the property is sold, the borrower dies or goes into long term care. Monthly payments do need to be made so lenders offering RIO will still require evidence of income to demonstrate that it will be affordable, so it will be important to gather records to show that.”