Discrimination Within the Mortgage Industry

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Discrimination Examples

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Anyone involved in the property market needs to be aware of the types of behaviour that could be seen as discriminatory. Discriminatory behaviour can exist on any basis, including sex, race, religion or ethnicity.

Sex Discrimination

Direct sex discrimination is reasonably easy to identify and is not something that most professionals would flout. An example would be if a mortgage lender gave different terms to a woman than they would to a man, purely because of the fact that she was a woman; for instance, if the woman was required to provide a guarantor but a man was not. This would be a clear example of discrimination and would be the type of behaviour that could result in an OFT investigation.

It is indirect discrimination that causes the real issue for property professionals, as often the type of behaviour that amounts to indirect discrimination is not, on the face of it, discriminatory. A classic example of this would be a mortgage lender who only offers mortgage products to those in full-time employment. Ostensibly, this appears to have nothing to do with sex; however, as most people who are not in full-time employment are women, these types of products could be considered indirectly discriminatory.

Similarly, landlords have to be certain that they are not behaving in a discriminatory way. For example, landlords are not allowed to place restrictions on the types of tenants that they take on, if it has the effect of being discriminatory. Restrictions such as whether or not the tenant is employed or a single parent may be considered as indirectly discriminatory; a letting agent should refuse to deal with any such situations.

Age Discrimination

This is a relatively new area of discrimination that has caused considerable problems for all types of businesses and services, including the property sector.

Even employers have no option but to change their recruitment practices. It has been suggested that having employment advertisements that require a certain number of years’ experience would be considered discriminatory on the grounds of age, as it would be necessary for an individual to be of a certain age in order to comply with the requirements. Instead, employers are now obliged to state that they would prefer a certain number of years’ experience or equivalent in a bid to get around this issue. Although this does not directly relate to the property market, it is a good indication of how seriously this new area of discrimination law has been taken by professionals across all industries.

The interesting effect that this is having on the property sector is that mortgage lenders are not able to discriminate on the grounds of age. A recent example of the current reaction to this legislation was where a pensioner aged 102 years was able to obtain a twenty-five year mortgage. This is, of course, somewhat bizarre as the individual would have to live to 127 years old if he were to pay off the entire amount.

In fact, it appears worse than that, as the pensioner in question took out an interest only mortgage on the property. The £958 that he will have to pay on a monthly basis to cover this mortgage will be achieved by renting out the property. This has resulted in a whole new breed of buy to let owners.

With the new requirement that lenders cannot discriminate against older borrowers, it is now possible for those who have retired to obtain a buy to let mortgage in order to finance their retirement. Currently, most lenders remain reluctant to lend money to anyone over the age of seventy-five. It is not clear how many lenders are now revising this policy in line with age discrimination legislation.

Bristol & West and Barclays have been amongst the high street lenders to embrace this new breed of investor and have opened their doors to borrowers of any age, provided, of course, that they meet the financial requirements. Independent advisors are recognising that this could be a whole new dimension to the property market. However, it is also clear that there are greater risks involved in lending to retired individuals. This is because these individuals are relying entirely on the rental income. This does not technically have anything to do with age, as many investors of all ages rely entirely on rental income.

One example of this new type of investor is seventy-five year old Richard Stone who now runs a portfolio of ten properties and has a reasonably small mortgage of just £120,000. Although he is evidence that older investors can be just as successful as other investors, he has admitted that he has found the whole process ‘quite stressful’.

Racial Discrimination

One of the most commonly referred to types of discrimination is racial discrimination. Bear in mind that this is not simply a case of skin colour but can also refer to any discrimination based on ethnicity, background and even the region where the individual was born.

This is a real potential hornet’s nest for property professionals, from estate agents to landlords and mortgage brokers to lenders; almost everyone is potentially impacted by race discrimination.

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