Lenders consider new ‘divorce mortgage’ to cater for soaring over 50s splits

According to recent government statistics over-50s are now UK’s most rapidly expanding divorce group.

And with 28 per cent of divorcing couples selling their home, according to research from Nationwide, lenders are looking for an innovative product to meet the demand of those whose lives had been thrown into turmoil just prior to retirement.

According to The Telegraph newspaper, such a mortgage would be designed to allow individuals to stay in their home after a split, even if they don’t have the finances to do so by allowing one party to borrow enough money to buy the other out for a set period of time, so one half of the couple can stay in the property.

The pioneering product is see as suited to couples with children who don’t want to disrupt the family home and/or where there is mutual agreement about one partner being more suited to the property, or simply because of financial practicalities for both parties.

The new mortgage doesn’t exist yet, but lenders are considering it and brokers say it could be introduced by the end of the year.

Under the proposed plan, the lender would give the divorcee a lump sum, which they could use to buy their estranged partner out of the home.

The bank would also “lend” them an extra amount that would be deposited in a savings account and used to pay the interest on this loan over a set period of time.

At the end of that period the borrower could either sell, paying the lender back from the equity in the property, or take on the full mortgage themselves if their circumstances had changed.

Simon Collins, of broker John Charcol, said banks know that this is an under-served area, with more innovation needed to stop divorcing couples having to sell and move.

He told the newspaper: “It’s all about helping someone stay in their home for a set period. So for example, the term for the product could be as long as children are in full-time education.

“No lender has taken it on yet, but I’d like to hope there might be someone offering it by the end of the year. With the divorce rate where it is there are a lot of people in this situation who end up renting and paying a lot for it, and it doesn’t need to work like that.”