Warning on loan extensions over age 70

Struggling mortgage holders have been warned against extending their loans into old age following revelations that banks are doing deals with customers to make repayments into their 70s.

Support groups for the elderly and mortgage holders both warned yesterday against homeowners taking on huge amounts of debt beyond retirement age.

The Department of Finance this week said that the most popular restructuring method for one in three mortgage holders was paying back the full amount over a longer period.

Department chiefs said deals were being made for people to pay back loans into their 70s but that it was up to banks to decide if a borrower had the capacity to meet repayments.

Central Bank guidelines stipulate that a ceiling of 70 years of age applies for term extensions “unless there is firm evidence that an older age limit can apply”.

It says mortgage extensions are only granted for people beyond retirement age where there is “evidence that the borrower can, through pension or other sources of verified income, service the revised loan repayments to maturity on an affordable basis”.

Age Action’s Gerry Scully said he himself will be paying his mortgage until he is 71.

“I got one late, 10 years ago,” said Mr Scully, aged 54. “I’m in that situation now. It all depends on a person’s retirement age and how many years someone has already paid into their mortgage.”

Mr Scully said the issue of elderly people paying mortgages into their 70s will become an issue. “It’s not right,” he said. “But what’s the alternative? Foreclosure [on a loan] or the banks taking a hit?”

Irish Mortgage Holders Organisation director David Hall asked how many solutions for borrowers extending loans into old age were stress-tested for nominal increases in interest rates. “In 10 years’ time, that could be ratcheted up and mortgage costs too,” he said.

“Our generation will end up having mortgages beyond their retirement. But with what funds? The State pension? If you are 65, you have equity in the house, but the balance of payments are still there. Then repossession at that age can become an issue.”

PermanentTSB CEO Jeremy Masding told the Oireachtas finance committee last month that mortgages for home loans and buy-to-lets must be paid off by 65 and 70 respectively or the property must be sold.