Employment - age concern!Posted on: 11 August 2014 by Steve Wanless
Steve Wanless illustrates how older people are discriminated against through mortgage lending and other financial services.
It appears as if the battle of the sexes has been replaced by the battle of the ages as a topic of national obsession.
The Prime Minister’s cull of the males in “grey suits” in the recent cabinet re-shuffle led to the introduction of several new female ministers; the newspapers dubbed it “Ladies Day at Westminster” as David Cameron attempted to redress the balance.
Yet, it’s the age gap that is being promoted more and more in the media, as statistics suggest that one generation is lording it over another.
A popular concept is that is the “baby boomers” (those born between 1946-1964) have it all – and have had it all!
Not only are they living longer, but possess property that has enjoyed several booms, have final salary pensions and own a disproportionate amount of this country’s wealth. And, according to some (especially those struggling to get on the housing ladder), have left later generations to pick up the tab!
Many of the younger generation are still living with their parents into their thirties and the proportion of home owners between 24-32 has fallen quite dramatically in recent years. Any benefit of living longer, possibly towards the century mark, is matched by worries about pensions, health, the health service and health care.
Still, it is hard to believe that anyone could be envious of someone who is 30 or 40 years older. Perhaps, there’s a little of the “grass being greener” syndrome, but it is almost certain that today’s pensioners are just as envious of those embarking on adult life with all their adventures to come.
George Bernard Shaw’s view was “Youth is a wonderful thing. What a crime to waste it on children.”
Oscar Wilde’s verdict in “Dorian Grey” is more reflective: “The tragedy of old age is not one is old, but that one is young.”
As we all know, there is no one generation that has it all.
Politicians are well aware of this, yet they do target those with assets (tax revenue) and certainly those who come out to vote (the older generation). The pension changes, that will give more control back to the individual and come into force next April, are expected to help the Tories come General Election time a month later.
Yet, both the young and the old are finding it tough when it comes to finance, even when they are well paid, have assets, savings, investments and property. The financial word remains slow in adjusting to changing circumstances, even since the 2008 recession.
That is why an Independent Financial Adviser (IFA) provides such useful service. Advice on how to get the finance is just as helpful as the guidance about planning for the financial future, especially when it comes from an expert.
The financial pages and websites are full of stories of woe from all ages struggling to make simple financial choices when dealing with lenders.
Last week’s “Your Money” in the Daily Telegraph highlighted Victoria Wallace’s attempt to get a mortgage. Victoria, who earns a six-figure salary as chief executive of Leeds Castle, and her husband were putting down a 30% deposit.
The application was refused by the Yorkshire Building Society because her husband Sean, now 61, would be over 75 while the mortgage was still in place – despite the fact that his income was not included in the application and the Wallace’s only wanted to borrow twice Victoria’s salary.
The solution. Victoria has been forced to purchase the property in her own name – husband Sean is simply mentioned in the Santander mortgage agreement as another adult living in the property.
Victoria and Sean could have reduced the term to 14 years, but wanted the longer term of mortgage so they could free up more income now. They had planned to clear the mortgage before the end of the term, in any case.
The lenders could argue about what would happen if Victoria died before the mortgage was repaid; but most borrowers would be happy to take out life insurance in favour of the lender so the debt was repaid in full.
But lenders are not offering those options. Many IFAs complain that lenders simply stick to the rules, many of which have become stricter in recent months. Salaries are not the guarantee, a pension income is; borrowers can become ill or lose their job.
Most pension income is guaranteed for life, with built-in increases, yet lenders stick to an age limit, which many have reduced recently. This goes against the undeniable fact that we are living longer.
Recently, Santander lowered the age for taking out an interest-only mortgage from 75 to 65, although they remain one of the very few lenders who offer interest-only mortgages.
Repayment-only is now very much the norm, as selling the property as a means of repaying the debt appears to have vanished, with no explanation as to why.
The older generation are finding releasing equity to enjoy the twilight years in some comfort tougher the older they get – “asset rich and cash poor”. As Rumpole’s creator John Mortimer once observed: “There is no pleasure worth forgoing just for an extra three years in the geriatric ward.”
That situation is going to get worse unless the lenders take a more positive and realistic approach to those who are currently penalized simply because of their age. Pension spending would certainly be a boost to the economy.
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