Over-40s denied mortgages because they are too old under stricter lending rules

The study found that many lenders have imposed lower maximum age limits because of uncertainty over stricter regulations.

Research by a trade body representing lenders found that people aged over 40 seeking a standard 25-year mortgage are finding their options restricted because they will be borrowing beyond a normal retirement age of 65.

The new Mortgage Market Review (MMR) rules, which came into force in April, mean that lenders have to spend more time considering whether homebuyers can afford the mortgages they are applying for.

A report by the Intermediary Mortgage Lenders Association (IMLA) stated that the scope for interpretation of the MMR has convinced many banks that lending into retirement now carries extra risk if borrowers go on to find that their retirement income is less than expected.

Peter Williams, executive director of the IMLA, has called for the upcoming review of the MMR by the Financial Conduct Authority (FCA) to provide greater clarity.

He 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.

“Wherever possible, protecting consumers from themselves should not rule out options that would benefit them financially and meet an obvious need.

“Restricting access to mortgage credit is the right decision in some circumstances for the consumers’ long term security, but equally there are situations when a refusal to lend can prove to be to the borrower’s financial detriment.

“We need to strike a balance and the FCA review will be vital so that an update to the MMR rules can iron out some of these creases.”

Paul Green, a spokesman for over-50s group Saga, said it is “crazy” that people in their 40s should be having difficulty obtaining a mortgage deal because of their age.

He said: “People in their 40s can already see their parents having to work to far beyond 65 now, so the chances of them being able to settle into retirement at such a youthful age are going to be unheard of.”