Age and Home Loans: A Case of Misunderstanding or Systemic Challenges?
A recent case of a 43-year-old Melbourne woman being denied a home loan has sparked significant debate online, raising questions about the challenges older Australians face in securing mortgages. While the woman claimed her age was the primary reason for the rejection, experts suggest her financial position played a bigger role.
The Story Behind the Knockback
The single Melburnian, earning $110,000 annually, had saved $60,000 since moving to the city in 2018. Despite having no dependents and maintaining excellent credit, she was reportedly denied by one mortgage broker and pre-approved for only $200,000 by another. She shared her frustrations online, where she revealed additional context, including a long-standing student loan indexed at 7% per annum.
While the woman described the student debt as “illegal” and linked to the now-defunct Student Financial Supplement Scheme, government guidelines do not currently classify the scheme as under investigation. Regardless, the debt appears to have impacted her borrowing capacity.
The Broader Context: Age and Lending Policies
The woman’s claims drew responses from others facing similar struggles. One 51-year-old earning $300,000 annually shared that major banks declined his application, citing employment instability. Other online users highlighted the irony of current market conditions: many Australians can only afford to consider homeownership in their 40s, yet face increased scrutiny when applying for mortgages.
Housing affordability and lending policies continue to present hurdles. Research from the Housing for the Aged Action Group shows a decline in the number of older Australians owning homes outright by age 55, indicating growing housing insecurity in recent decades.
Industry Experts Weigh In
Mortgage brokers and financial experts have pointed out that the woman’s situation likely stems from factors beyond her age.
Deposit Size and Risk: According to Mortgage Choice broker James Algar, smaller deposits without access to government schemes can make securing a loan challenging. With a $60,000 deposit, including stamp duty costs, the applicant represents a higher risk.
Exit Strategies: Mortgage brokers are required to outline an acceptable exit strategy for older borrowers, particularly beyond retirement age. However, Algar notes this typically becomes relevant only after age 55.
Interest Rate Buffers: Craig McDonald, Director of CBM Mortgages, highlighted how banks assess borrowing capacity using a 3% buffer above the actual interest rate, which can significantly limit loan approvals.
Debunking Age Myths
Many mortgage brokers have refuted the notion that age alone could be a disqualifying factor for a 43-year-old applicant. Loans for individuals over 60 are regularly approved when supported by appropriate exit strategies and financial stability.
One Reddit user, who identified as a lender, stated, “I’ve written 30-year loans for people over 60 on many occasions. The key is an appropriate exit strategy.”
The Path Forward
The woman's case underscores the importance of understanding lending policies and engaging with experienced brokers. While challenges persist, particularly in the context of high interest rates and property prices, strategic planning and professional advice can help navigate these obstacles.
For older Australians re-entering or entering the housing market later in life, having a clear financial plan, exploring alternative lending solutions, and leveraging government schemes where possible can improve their chances of approval.
