REMOVING the age limit on interest-only mortgages could be a good thing

REMOVING the age limit on interest-only mortgages could be a good thing for those fighting to get a foot on the property ladder, an expert says.

Reports last week revealed that one bank has removed the age limit on its interest-only mortgages so that borrowers can take out loans for up to 40 years -however old they are.

This led to many commentators predicting it will open the door to a surge in people looking to benefit from “forever mortgages”.

Commenting, property expert Jonathan Rolande , said: “Giving homeowners more options when it comes to what they do with their money and property is never a bad thing. Older owners often feel ‘property rich but cash poor’ and the recent rises in home values and the increase in the cost of living have brought that into sharper focus.

“In the right circumstances, owners might wish to mortgage to help a loved one onto the property ladder, to carry out expensive repairs and improvements, or simply just to spend extra cash on a dream holiday.”

But Mr Rolande, from the National Association of Property Buyers, added: “The concern is for the wider market. Money extracted will often be used to invest in a buy to let or to help an offspring to buy, further inflating prices. It seems like property can only ever increase in value, and a generation has never seen anything but this situation. However, injecting more and more liquidity into property may just make any future correction much more painful.”

Suffolk Building Society last week removed the age limit on its interest-only mortgages so that borrowers can take out loans for up to 40 years.

The age limit for standard repayment mortgages had already been removed. For interest-only borrowers it had been 95.

To qualify you will need at least £200,000 equity in your home. If you are retired you will be able to borrow up to 50 per cent of the value of your home, but will need an income of at least £20,000 a year. You can borrow up to 75 per cent if you are still working, with no minimum income requirement.

All the leading banks are now willing to issue loans that will last into a borrower’s seventies and are becoming more likely to agree to larger loans.

Making it easier for older people to get a mortgage will give them alternatives to equity release, where you borrow against the equity you have in your home but the loan is not paid off until your home is sold, usually when you die or go into care. Interest rates on equity release are typically higher than on mortgages.

Last year a record £6.2 billion was borrowed through equity release. More than 93,000 homeowners aged over 55 used it as a way to release money from their property without having to move.