Comment on Abbey's new lending criteria

Published:

29/07/2009

Topic:

Press Release,Money,Mortgages

Louise Cuming, head of mortgages at moneysupermarket.com said: "Taking a more conservative approach to mortgages into retirement is a sensible move from Abbey, and one which we expect other providers to follow as lenders move to ensure the long term affordability of mortgage debts."

"Abbey has reduced the maximum age at the end of the mortgage term from 85 to 75 years, and borrowers should take this as a wake up call to make changes now to ensure their mortgage is repaid before retirement. This is increasingly important as a growing number of people are facing a significant drop in income with inadequate pension provisions.

"These days first time buyers are older when they take out their first mortgage, with a typical first time buyer being around 33. If they stay in the same house, they'll have reached 58 by the time they finish their 25 year mortgage term. But if they move home a couple of times taking the mortgage back to a 25 year term each time, quite soon the end will be nearer 70.

"Homeowners should take advantage of current low mortgage rates and put some sorely needed extra equity into their homes and think about shortening the requested term if they can afford to. By reducing repayments from 25 to 20 years, homeowners could save £32,000* in interest and in addition it means borrowers are more likely to be able to clear their mortgage before retirement."

- Ends -

Notes to editors:

*Based on a £150,000 mortgage at 6%
25 year repayment                     £966.45
20 year repayment                     £1,074.65
Difference                                  £108.20
Assuming everything stays the same, you would pay £25,968 more for the first 20 years - but save £57,987 over the last 5 years - saving  £32,019.

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