Rise of the mortgage into your 80s has pros and cons

It looked initially like a headline-grabbing pitch when MoCo, the newest mortgage lender in the Republic, owned by Austria’s Bawag, unveiled home loans earlier this year that could be repaid until the borrower reached 80.

But it’s catching. ICS Mortgages said this week it plans to offer home loans that can run until borrowers reach their octogenarian years. It had previously only issued loans repayable by 70, in line with the mainstream banks. The upper end of the range is between 75 and 80 in the UK.

Both non-bank lenders have insisted they will lend prudently and that prospective borrowers looking for loans well into retirement will need to demonstrate repayment capacity, including income from pensions and rents on other properties.

It’s certainly not for everyone. And such loans should only be entered into very carefully – by borrower and lender alike.

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Fancy still paying back a mortgage well into your 70s, especially when private sector pensions have deteriorated in recent decades with the gradual move from schemes linked to final salary to ones dependent on investment performance? (Or maybe that’s why someone may find themselves having to consider such a late-maturity loan in the first place.)

But the dysfunctional state of the Irish housing market – combined with regulatory mortgage limits introduced in 2015 – means almost half of first-time buyers in the country are currently over the age of 35, compared to fewer than one in five 20 years ago. Subsequent trading up to another home may be out of reach for some with the standard maximum age allowed by banks for repayments.

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Then there is the fact that currently about one in 10 Irish marriages end up in separation or divorce. Mortgages that must be repaid by 70 affect the ability of many to make a fresh start and buy a new home. The alternative is the expense of paying rent in retirement.

ICS claims the ability to borrow for longer may help and encourage people to move house as they grow older – perhaps freeing up underutilised houses for growing families in the process.

The ability to repay a standard mortgage until a borrower reaches 80 is an alternative to the equity release and home reversion products (where the lender takes a stake in a home) targeted at older borrowers. But borrowers entering into any of these options need to take independent financial advice.