Cash clinic: So why can’t healthy, secure over-75s get a good mortgage offer?

QWe have looked at quite a few attractive mortgage offers that are being advertised by the major high street banks, only to discover on enquiry that they are not available to over-75s.

Why should this policy be applied across the board? My husband and I are both in good health, have a secure pension income and a large house to sell in due course, but we need some cash for the interim period in order to buy a smaller house to downsize. Please advise us as to our options.

EC St Andrews

AEffectively, you are looking for a form of open-ended bridging until you are able to sell your current property. Unfortunately, most lenders will not consider bridging finance until you have accepted an offer and concluded missives on your current property. So the question is, what are your options when this is the case?

Historically, it was usually possible to obtain mortgage borrowings that could perform this role, and in many cases provide a more cost-effective alternative to bridging finance. However as we all know, we are currently living within a far more prohibitive lending climate, irrespective of age, income or other circumstances.

The regulator has deemed lending into retirement as “high risk”, so most lenders have either stopped lending altogether or simply tightened their criteria for borrowers over the age of 65. Despite the fact that you have a secure pension income and an unencumbered property, the majority of the banks and building societies that operate in Scotland have no appetite to lend to people lying within what they consider “high risk” categories.

In Scotland, there are only two lenders who will currently lend to people up to the age of 80, and only one that will lend to anyone above this age. The Leeds retirement mortgage allows you to apply before the age of 70 for a minimum term of five years up until age 80. This leaves us with one remaining option, which is The Scottish Building Society.

It will offer a variable rate at 5.29 per cent, on an interest only basis, with a minimum loan amount of £30,000. You are able to borrow up to 25 per cent of the equity within the property, although there are redemption penalties if the loan is repaid within three years. This deal attracts an arrangement fee of £799.

The alternative is to buy and sell on the same date, thus by-passing the need to obtain finance. Clearly, however, logistically this can be difficult and the best laid plans don’t always work out in the way we would like them to. However, I hope this answers your question and helps you to make an informed decision as to your next move.

• Graeme Leckie is director at Kelvin Financial Planning

If you have a question you need answered, write to Jeff Salway c/o The Scotsman, 108 Holyrood Road, Edinburgh, EH8 8AS or email: [email protected]

For more on the difficulties facing older borrowers seeking mortgage finance, see our recent story at www.scotsman.com/business/personal-finance/older-borrowers-locked-out-of-mortgage-market-by-lenders-1-2783355