The question used to be “when is it too late to buy a property?”, but now the question that you first need to ask is “how old is too old to borrow to invest?”
Since the APRA mandated stricter lending guidelines and the Royal Commission created fear amongst bank credit assessors, it has become increasingly more difficult for those fifty years of age and over to borrow to purchase property. I’m not convinced this is the right approach, especially given the prospect that those in this age bracket today are most likely going to live and work longer. After all, the pension age could be seventy in 2035!
Maybe those in ‘power’ believe that once you hit fifty years of age you are less capable of making rational decisions for yourself, but I disagree, and I have many friends and family who also!
Then again, most people responsible for making these policy decisions are likely to be over fifty, so they are more likely to know what it means to be fifty. If we follow this logic, their age would render them incapable of making these decisions themselves. Hmmm!
Let’s do a quick shout out to those aged fifty to fifty-nine – do you believe you are capable to make informed financial decisions?
Perhaps those who say they are not, should not be allowed to borrow money without meeting very strict guidelines (that are currently in place). For the rest, should we include an IQ test and put them through a physical fitness regime as well before applying normal lending policy to their situation?
Of course, I am having a little bit of fun with this topic to illustrate the potential absurdity if lenders focus to much on someone’s age.
According to Chairman of Property Investment Professionals of Australia, Peter Koulizos, and podcast co-host of the Property Planner, Buyer and Professor “the cut-off age for borrowing to start investing is past 60 years of age.
This age bracket makes more sense. Although if the policy framework is well structured, then we should be able to make decisions based on everyone’s unique circumstances – and age should be irrelevant.
Keep in mind that loans are assessed on a thirty year loan term as the default approach. This means if you are looking to borrow beyond your fifties, it is quite likely that the lender will either want to see that you have enough wealth in other investments or superannuation to justify a thirty year loan term or they will reduce the loan term. Reducing the loan term means that your repayments will increase, which also means that the amount you can borrow will decrease proportionately. This is where some of those caught up in today’s policy restrictions are increasingly frustrated with the limitations put upon them and their ability to create wealth for their families.
Many of those in this age bracket have not been part of a cushy superannuation scheme such as a defined benefit scheme, and have not had the good fortune to receive superannuation since the day they started working. The property market has always been attractive to would-be investors. The aspirational desire to provide for you and your family is fundamental to a successful economy and a healthy functioning human being.
We should educate and empower people to drive for personal independence and minimise any lending policies that restrict certain segments of the population.
To argue otherwise is oversimplifying the landscape to suit our own world view.What do you think?