Mortgage Warning For People Aged Over 40

As mortgage lending continues to slow an industry body is warning that new rules mean people over 40 are being denied loans because of their age.

British Bankers' Association figures today showed that mortgage approvals were 16% lower in October than in the same month last year - accelerating from a 10% decrease in September.

They were released hours after Nationwide reported a £1bn fall in its own gross mortgage lending.

The statistics add to evidence the Mortgage Market Review (MMR) regulations imposed in April are curbing borrowing.

A report by the Intermediary Mortgage Lenders Association (IMLA) found that many lenders have imposed lower maximum age limits on mortgage because of uncertainty over the rules.

It said the strict affordability checks meant that customers aged over 40 who were seeking a standard 25-year mortgage were finding their options restricted because they will be borrowing beyond a normal retirement age of 65.

The IMLA said the looming review by the Financial Conduct Authority of MMR's effects must examine the issue so banks and other lenders could take action to avoid an "extinction" of mortgages which stretch into retirement.

Its executive director, Peter Williams, said: "This issue goes beyond the transitional arrangements for existing borrowers, and means that efforts by the lending community to follow the spirit of MMR with new customers are being hampered by the very real concern that it may be cited against them in future.

"Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year.

"To avoid a situation where regulation brings about the extinction of mortgage terms that stretch into retirement, we need clarity and confirmation about where the boundaries of responsible lending truly lie.

"MMR has been a big step forwards but having put a strong framework in place for the future, attention must now focus on honing the template so the pendulum doesn't swing too far towards conservatism.

The report was released as Nationwide, which contributed to the study, confirmed that its mortgage lending fell in the first half of its financial year.

In the six months to 30 September, it said gross mortgage lending reached £13.1bn compared to a total of £14bn in the same period last year.

Net lending tumbled 36% to £3.6bn.

It said: "We have seen an increase in competitive activity in the first half of this year across most products and services, especially in the mortgage, savings and current account markets."

Nationwide reported an 83% increase in underlying profits to £606m.