Lending into retirement: compensation for mortgage borrower deemed 'too old' at 59

Co-op Bank ordered to pay compensation after rejecting borrower for being 'too old' at 59.

A borrower has won compensation after he was turned down for a mortgage on the basis of being too old.

Peter Day wanted to extend his mortgage in order to pay for his daughter’s wedding. At the time he was 59 and close to paying off his mortgage, but asked to extend his term by five years. However, despite having three final salary pensions ready to cover him in retirement, he was turned down for the mortgage extension by Co-operative Bank.

The lender has now been ordered to shell out £2,000 in compensation, having fallen foul of the Equality Act.

Mr Day told the Daily Mail that he had been appalled by the decision to reject his mortgage extension, adding: “It was clearly age discrimination as paying the money back and my current financial position were clearly no problem.”

The Co-op said that is has since changed its policy and extended the maximum age limit for mortgage repayment from 68 to 75.

Lending into retirement

Since the implementation of the Mortgage Market Review in 2014 lenders have been forced to ask more questions when judging a mortgage application, and install tougher affordability requirements. As a result it’s increasingly become problematic for older borrowers to secure mortgage deals which will run into their retirement years.

That may be slowly changing though. In November last year the Building Societies Association announced that its members had committed to reviewing the maximum age limits for mortgage borrowers.

Building societies are already some of the more generous lenders when it comes to offering mortgages into retirement. For example, Market Harborough Building Society says it will lend up to the age of 85 where you have a proven income, including your private pension. Ipswich Building Society adopts a similar position, and has even launched a Retirement Mortgage Programme.

If you need to borrow into your later years, then a building society is a pretty good first port of call.

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Being treated fairly

In its judgement, the Ombudsman said that it felt the Co-op had not treated Mr Day fairly.

If you believe that your mortgage lender, or any other financial firm, is not treating you properly then don’t just take it – complain!

The first step is to complain directly to the firm. They will have their own complaints procedure that you will need to follow. Be sure to keep all correspondence in writing, as you may need to refer to it again later.

If after eight weeks the firm has not responded to your complaint, or not addressed it to your satisfaction, then you can do what Peter Day did and complain to the Financial Ombudsman Service (FOS).

The FOS is a free service set up to adjudicate such complaints. If it believes that you have been mistreated, it can order the firm to pay you compensation. In Mr Day’s case, the Co-op had to pay £500 in compensation, plus the £1,389 it had cost Mr Day to move his mortgage to another lender.

Be sure to read How to complain to the Financial Ombudsman Service. And remember, you don’t need to pay a claims management firm to handle your case! 

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