Bank criteria an ever-changing picture

It’s not only SA banks that keep changing their qualification criteria for home financing – lenders in many parts of the world are seeking different ways to cut their risks in the face of ongoing worries about the global economy and their own higher costs of borrowing.

In the UK, for example, several smaller banks and building societies have now lowered the maximum age that borrowers can be at the end of their home loan terms. The Financial Times reported recently that some have dropped this age limit to 75 now, while others have lowered it even more to 70 – which effectively means that they can’t give new 20-year home loans to people over the age of 50.

bank criteria

And since most of the major banks already have an upper age limit of 65, this is going to put a huge damper on home purchases by anyone who is retired or approaching retirement. What is more, it does not seem to take account of the fact that the number of people working well-past the traditional retirement age of 65 is growing all the time.

On the other hand, however, lenders in the UK are setting a great example by being more flexible about lending to people who are self-employed or working on fixed-term contracts. Such buyers have typically struggled to obtain home loans in the past five years, but now more lenders are adapting their criteria to enable them to qualify.

These banks, it would appear, have now recognised that there has been a major and probably irreversible shift in the way people work – and that giving loans to self-employed or contract workers is not inherently more risky than giving them to corporate employees who could be made redundant or fired at any time.

Figures from the UK Office of National Statistics show that the number of self-employed people in the UK has risen by 10% since the start of the financial crisis, while contract staff now make up 14%.

And in June, leading mortgage lender Halifax made its standard mortgage range available through its branches for contract workers who can provide evidence they have been in the same field for at least a year. Borrowers must have a contract where they earn at least GBP500 a day or GBP75 000 gross per year.

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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