A mortgage broker has warned of an impending crisis for tradespeople who have mortgages running into their 80s. Borrowers have been warned pension income will fall short of covering their mortgage repayments.
Lenders Approve Long Mortgage Terms Based on Current Income
Jamie Elvin, director of London-based Strive Mortgages, which specialises in self-employed and sole trader mortgages, expressed growing concern. "I'm increasingly worried about the fact that many lenders, including some high street banks, continue to let borrowers take mortgage terms right up until the age of 80 but are making their decision purely on a person's current earned income," he said.
While this approach may work for some, such as remote workers who can continue their jobs into their 70s, it poses significant risks for those in physically demanding roles. "It is not the case for people in the trades, such as scaffolders, builders, plumbers, painters and roofers," Elvin added.
Physical Demands of Trades Make Extended Working Unrealistic
Elvin questioned the feasibility of tradespeople working into old age. "Is a scaffolder realistically going to be climbing ladders and doing an extremely physical job until their mid-seventies and beyond? I honestly doubt it," he said.
He warned that this situation mirrors the interest-only mortgage crisis. "There is a real risk that this is a crisis in the making, up there with the interest-only mortgage crisis, and that we are kicking the can down the road by allowing too many people to borrow for too long," he stated.
Pension Savings Insufficient to Cover Mortgage Payments
Many borrowers assume their pensions will cover mortgage payments in later years, but Elvin noted that self-employed and tradespeople often do not save enough. "People often assume that, in the final years of their mortgage, their pensions will cover their mortgage payments. But many of the self-employed and tradespeople I advise simply won't be putting enough into their pensions for this to happen," he explained.
A recent report by the Pensions Commission revealed that 15 million people are not saving enough for retirement, a figure that could rise to 19 million without action. "Basically, millions of Brits are going to be facing a severe income cliff-edge when they retire," Elvin said.
Maths Doesn't Stack Up for Long-Term Mortgages
Elvin concluded: "That's what a problem looks like. The maths just doesn't stack up. Why lenders continue to do this is beyond me."
