Brokers are calling on lenders to ditch the hard and fast rules on lending to older borrowers, saying it amounts to age discrimination.
Rael Bricker, managing director of House + Home Loans, says he can understand the banks are trying to protect themselves, but feels some ‘age policies’ have taken the matter too far.
“I think it should be viewed much more on a case by case basis, whereas I think lending managers are all so nervous about being on Channel 7
chucking someone out of their house when they’re 65 that they’re being more cautious than they need to be,” says Bricker.
Allan Faint, director of Home Finance Centres of Australia, says since the introduction of NCCP and the end of the GFC, lenders refuse to make exceptions for financially sound older borrowers.
“It’s not right that somebody in their 50s can’t get a loan. The only thing that’s changed is the terminology. There’s nothing specific in the legislation that says somebody in their 50s can’t get one but the terminology has changed so that it can be twisted that way… And I’m sure it’s got nothing to do with fact that 10-years’ worth of loan repayments isn’t really a great profit margin to a lender when you can get a much greater profit from somebody else.”
Bricker, however, argues that the average loan only lasts six years before it is refinanced, and therefore doubts the policies come down to the banks’ bottom lines.
“But from a bank perspective and what they view as responsible lending, they’ve got to say ‘What is the person’s exit strategy?’ If they don’t have enough super to cover their mortgage then they’re saying that selling the house in 10 years’ time is not a valid exit strategy,” says Bricker.
Faint is currently in his 50s, and says he is concerned lenders would be reluctant to let him refinance his loan because of his lack of super, despite being a long way off retirement.
“A lot of small business owners and self-employed people don’t have super, but those people in particular are being told they can’t get home loans because they’re in their 50s. It used to be considered normal and practical that once you got up to a certain age and got up to retirement and your house was too big or you weren’t going to be able to afford it then you downsize to something smaller.”
Bricker agrees, adding that upgrading your property at 55 in a high growth area with a look to downgrading again in 10 years’ time should be considered a valid strategy if that person has a history of buying and upgrading property.
“If they’ve doubled the value of their equity over that 10 year period it’s actually not a bad strategy. Do I think they need to be more lenient? No, but I think they should look at a person’s history. If it’s their first home they’ve ever bought… well, why? But if they’ve upgraded their home every three or five years then they’ve got a history of doing that and there’s nothing wrong with that they understand what they’re doing.”
Lenders seem to be happy to fund borrowers aged 50+ in buying investment properties, says Bricker, but he recounts one story of a woman in her 60’s simply wanting to switch from a low-doc to full-doc loan.
“Not increase her debt, just refinance. It was the same lender, full-doc and they said ‘Oh because you’re in this age group and you’ve got no super we can’t do it’. So they actually left her on a higher interest rate even though they couldn’t justify going to a lower interest rate. Their policy says she’s 62 and they’ve got to work it out over 20 years and she doesn’t service.”
Faint has similar stories of borrowers stuck in financial limbo due to NCCP changes, and says it’s time lenders addressed the discrimination.
“Something needs to be done about it. Nobody is willing to say it’s because of age discrimination and it drives me nuts.”