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18 Apr 2019

Buy-to-let mortgage boost for older borrowers

Santander extends maximum age limits to meet demand from older landlords

After years of struggling to find lenders willing to provide them with mortgages in later life, older borrowers are now being spoiled with options as high-street banks and building societies clamour to launch new products and change existing terms to meet an ageing population.

Last week, Nationwide, the UK's building society, launched a new range of retirement mortgages to help older borrowers boost their retirement income and provide them with more flexible options to use the equity in their property.

It joins 18 other lenders offering mortgages specifically designed for older borrowers and retirees.

And this week, Santander increased the maximum age and term on its range of buy-to-let mortgages, which it stated was to meet the demand from its older customers.

Which? explores the buy-to-let options for older landlords, whether Santander's changes put them ahead of their rivals, and what your options are if you want to take out a mortgage to rent out a property.

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Buy-to-let mortgage maximum ages

First reported by Mortgage Solutions, Santander has increased the maximum age at the end of the mortgage term from 75 to 85, and the maximum mortgage term on its buy-to-let range from 25 years to 40 years.

This means that someone retiring at the age of 65 could potentially take out a buy-to-let mortgage with Santander for 20 years - provided they meet the bank's criteria for lending.

Previously, the oldest you could be to take out a mortgage for the maximum term of 25 years was age 50; now, someone deciding to become a landlord at the age of 45 could borrow for four decades before the loan needs to be repaid.

Santander, however, is playing catch up with the rest of the buy-to-let mortgage market when it comes to lending well into retirement.

Which? analysis of data from Moneyfacts has found that of 2,057 buy-to-let deals currently on the market, almost two thirds (65%) have a maximum age at the end of the term of 85 and above. Some 30% of the deals have a maximum age of 85, and 9% have a maximum age of 95. A fifth (20%) have no maximum age at all.

The chart below shows the range of deals available at increasing maximum ages.

Buy-to-let mortgage terms: how long can you borrow for?

This year has been focused on the rise of the 40-year mortgage in the residential market, with more than 50% of deals currently available offering a maximum 40-year term - up from 36% back in 2014.

A four-decade term on a buy-to-let mortgage is less common - our analysis found that one in four (27%) have deals allow you to borrow for 40 years.

The vast majority of buy-to-let mortgages (49%) have maximum terms of 35 years, while 18% have a maximum term of 25 years.

This means there are plenty of options for older buy-to-let borrowers - 55% of buy-to-let deals are available to those aged 50 at the start of the loan. However, a fair chunk have low maximum ages and shorter maximum terms - we found 230 deals (16% of the market) are only available to those aged 35 or under at the start of the loan.

What's going on in the buy-to-let market in 2019?

Last week, we revealed that average interest rates on fixed-term buy-to-let mortgages fell to 3.26%, with the cheapest deals available for an initial rate of around 2%.

And there are a rising number of buy-to-let deals becoming available to property buyers with smaller deposits. Typically, you need to put 25% down on a buy-to-let property, but we have found a number of lenders are offering deals to those with 20% and even 15% deposits.

Landlords, however, are facing a slew of new rules and regulations to abide by. Since the beginning of April, landlords have been forced to improve the energy efficiency of the properties or face a potential fine, while on 1 June, the government ban on charging tenants lettings fees will kick in, with costs falling to property owners.

This story was updated on 18 April to reflect that Santander's revised terms were first reported by Mortgage Solutions, not FTAdviser.