Bank is rapped for refusing mortgage to couple in forties

A COUPLE in their 40s became unusual victims of age discrimination after their bank rejected a £ 250,000 mortgage application – because it decided that the husband was too old.

HSBC was ordered to pay them compensation after the banking industry watchdog found it ‘relied on untested assumptions, stereotypes or generalisations in respect of age’ in the case.

The bank was criticised for refusing to grant the £250,000 loan because the husband would have been over 65 when the 18-year deal finished, according to The Sunday Times.

In the first case of its kind, the Financial Ombudsman Service found the lender guilty of being ‘unfair’.

The Mail revealed last November that buyers in their late thirties and forties are being refused mortgages because they are ‘too old’. Fearful of breaking the rules, banks are turning down applicants who are likely to be making repayments in retirement when incomes are lower.

Representatives of 24 big lenders – including Santander, Nationwide, Lloyds and Barclays – warned that borrowers in their 40s are falling victim to the new regime. But now HSBC has been ordered to pay £500 to the couple for their ‘distress and inconvenience’ over the ‘unfair application of its age policy’, and told to reconsider their loan application.

Bosses at the bank defended their decision and argued it was ‘entitled to apply a maximum age policy’, according to ombudsman documents seen by the newspaper.

The couple, who do not wish to be named, applied for the joint interest-only mortgage over 18 years on their home, in which they held substantial equity.

HSBC had issued a decision in principle, indicating that it would be prepared to lend the money, but it then refused to proceed due to the husband’s age. The husband, however, does not plan to retire at 65 and his final salary pension would be large enough to cover the monthly repayments. He also has pension pots and his wife would have been able to pay the loan from her income alone, if necessary. The couple complained and claimed they were victims of discrimination.

The complaint was upheld by the ombudsman – the first time that it has done so specifically on the grounds of age for a mortgage. HSBC said its decision was based on its age restrictions for interest- only loans, a type of mortgage that allows borrowers to pay off the interest but none of the capital.

The bank has tightened its criteria, and does not offer interest- only loans with a term beyond a borrower’s 65th birthday. For repayment mortgages, the age ceiling is 75.

The bank told The Sunday Times: ‘As a responsible lender, we need to ensure that our customers have the ability to repay their mortgage.

‘And with interest-only lending we also need to understand how a customer will repay the capital when the mortgage matures.

‘When we look at a mortgage application, we take a number of factors into account – which includes assessing each customer’s individual circumstances.’

‘Unfair application of its age policy’