A law firm has warned brokers that all older borrowers, or those carrying their mortgage forward post age 65, should have a Lasting Power of Attorney (LPA) in place.
Despite the trend towards older mortgage borrowing, Moore Blatch has stated some clients may become unable to manage some, or all, of their financial affairs at some point during their retirement, due to physical ill-health or a lack of mental capacity.
According to the NHS, the risk of Alzheimer’s disease and other types of dementia increases with age, affecting an estimated one in 14 people over the age of 65 and one in every six people over the age of 80.
The problem is potentially becoming more acute, given the Building Societies Association recently revealed more than half its members will now lend to borrowers up to or beyond the age of 80.
One of those societies pushing age limits is the Vernon Building Society, which offers a discounted rate on its Retirement Mortgage as an incentive for borrowers to register a lasting power of attorney.
LPAs allow a person to appoint a third party (attorney) to make decisions about their health and welfare, as well as finance and property, if they are no longer able to do so themselves.
In the context of mortgage borrowing, this includes both managing repayments and the means by which they make those repayments. Without an LPA, the account receiving the rent and/or paying the mortgage may be frozen, which could lead to an individual or couple defaulting on their mortgage.
Fiona Heald, partner in the court of protection team at Moore Blatch, recommended most people have the security of an LPA in place, but particularly those who borrow at an older age.
“There is still a general lack of awareness of LPAs and why you might need one,” she stated. “It is far easier than most people realise to have an LPA drafted by a solicitor and put in place and it is especially important for protecting your assets.”
In June, St James’s Place laid out plans for several new products and services to help its advisers and their clients with the challenges of intergenerational wealth, including a lasting power of attorney service.
SJP’s divisional director for development and technical consultancy Tony Mudd agreed that all older clients should have LPAs, both property and welfare.
“While those with mortgages in later life could be impacted, in practice a joint account where either can sign where the mortgage is joint will not result in the account being frozen,” he explained.
“I would suggest there are other financial areas where having an LPA is more important, for example those in pension drawdown, given the need to make financial decision every year.”
peter.walker@ft.com
