Elderly sold most loans 'recklessly

More than 50 per cent of mortgages and loans that are taken out by the over-50s are either 'reckless or irresponsible' says the head of a charity set up to help borrowers who get into serious debt problems.

'Too many companies are jumping onto the lending bandwagon and granting loans without studying a borrower's circumstances, earning ability and - even more important - age and health,' says Mohan Chudha of the Family Care Trust (FCT) which is calling for time limits on lending to those of a certain age.

'There should be a five- to 10-year limit on any loans taken out when you reach the age of 60 for, as you get older, your health starts to decline, your faculties get feebler and you are less likely to understand the technicalities of loans and mortgages,' says Chudha, who recently helped a pensioner unable to read or write to grapple with debt problems after he took out a long-term, interest-only mortgage.

Chudha, who started the FCT six years ago, also recently helped a couple aged 68 and 59 gain legal backing after they went into arrears on a 25-year remortgage they had taken out. Though they were about to be evicted from their home by their lender, Chudha and his legal team got the order suspended by a county court and the case has now gone to appeal.

'The couple said they were advised to take out an interest-only loan even though they didn't know what it meant. Their financial adviser had merely said it was the best and cheapest option, although he didn't go on to explain that the reason it was cheaper than the other mortgages was because it didn't pay off the capital on their home.

'Far too many lenders are willing to hand interest-only loans to the elderly, yet they were originally set up for buy-to-let investors who, whether aged 23 or 90, can use their other properties as security for their loans,' says Chudha.

He is also calling on lenders to wrap loans to the elderly into mortgage protection policies (MPPs).

'The lenders make a big noise about fast-tracking the self-employed who take out self-cert mortgages when they are really cutting out the credit-searching and affordability factors that are crucial for the elderly borrowers. Every mortgage taken out by an older person should include an MPP repayable over the loan period - and not as a separate transaction - so they are protected if they get into arrears,' says Chudha. Another popular cash-raising source for those of a certain age are equity release schemes. Commonly known as reversion plans, they enable owners to raise capital from their homes for anything from university fees to Caribbean cruises.

Unlike mortgages and loans, the plans have strict rules on when, how much, and from whom a 55- or 60-something can borrow. Ian McNeill, secretary of the reversion plan self-regulator SHIP (Safe Home Income Plans), says: 'There are too many independent financial advisers and brokers who are pushing utterly unsuitable loans in the mortgage market.

'Though the Financial Services Authority now has powers to regulate the sales process it cannot do anything about the actual products that are offered to borrowers. Unless you're a best-selling author with millions in the bank, your ability to service a mortgage drops like a stone after the age of 60 or 65.'

A spokesman for Help the Aged said: 'Financial advisers should sit down and look at a person's circumstances, hopes, affordability and income. There's simply not enough financial advice and information for elderly people in the UK at the moment.'