More homebuyers in their 40s are unable to buy or remortgage their homes with tougher rules and rising house prices.
The number of people renting between the ages of 35 to 49 has doubled since 2001 and is expected to increase by a further 30% in the next five years according to Savills.
In particular people looking to buy in London have seen property prices increase by 30% in the last few years requiring an even larger deposit making it difficult to save fast enough.
Savills has said that people renting have been unable to reduce their housing costs to make savings. More first time buyers in their 40s will become dependant on parents to provide a deposit for their home purchase.
Greater competition from buy-to-let investors has increased the purchase price and reduced the supply of suitable properties for first time buyers or home movers.
New mortgage rules make it harder
The Financial Conduct Authority (FCA) introduced new rules following the Mortgage Market Review (MMR) in April 2014.
This has made it much more difficult to secure a residential mortgage for remortgage buyers, first time buyers and home movers as the rules focus on affordability.
Lenders must now check all applications to ensure the mortgage is affordable over the lifetime of the borrower. This includes income levels and outgoings such as child care, holidays and living costs.
For existing homeowners aged over 40, moving home or remortgaging can be difficult if lenders require the mortgage to be repaid by a specific age such as 65 or 70.
A shorter term for a repayment mortgage would mean higher monthly payments which could make the loan unaffordable.
This distorts the market as lenders prefers to advance a 95% loan to value mortgage to a younger first time buyer with no track record of repayments rather than an older borrower with a 50% loan to value remortgage buyer in their 60s with solid track record.
Fixed rate mortgages are cheaper
As mortgages become more difficult to secure for the over 40s the cost of fixed term mortgages becomes less and less. However, as the market expects interest rates to remain level the cost of borrowing is decreasing.
The best two-year fixed rate mortgage offers 1.49% for borrowers with a 40% deposit from HSBC. There is a catch as the arrangement fee is a hefty £1,999.
Taking into account the arrangement fee over two years with a £200,000 mortgage the total cost would be £7,959. This would mean this mortgage would be more expensive if you could find a mortgage for 1.94% and a fee for £195.
There is a five-year fixed rate can be found under 3.0% with Accord offering 2.59% with a 35% deposit and application fee of £975.
Even the Nationwide are offering a 10-year fixed rate mortgage of 3.49%, an application fee of £975 and 30% deposit.
The equity release mortgage buyer can secure fixed rates typically from 5.9% upwards without any evidence of earnings, important for borrowers with only pension income.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even buy a more expensive home.
Learn more by using the equity release calculator, mortgage monthly cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
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