Homebuyers in their late thirties and forties are being refused mortgages because they are ‘too old’.

Tough restrictions introduced in April have forced lenders to prove their customers will be able to afford to pay off loans.

Fearful of breaking the rules, banks are turning down applicants who are likely to be making repayments in retirement when incomes are lower.

A report released last night by a body representing 24 big lenders – including Santander, Nationwide, Lloyds and Barclays – warns that borrowers in their 40s are falling victim to the new regime.

A 45-year-old customer would be 70 before a standard 25-year loan was paid off. Even those in their late thirties seeking increasingly popular longer-term deals risk being knocked back.

Out in the cold: Homebuyers in their late thirties and forties are being refused mortgages because they're ‘too old’. File picture

The report by the Intermediary Mortgage Lenders Association says banks cannot be sure a borrower will keep paying when relying on a pension.

Those forced to take out shorter loans, typically 15 years, face steeper monthly repayments. And others looking to remortgage could be denied fixed-rate deals, instead being kept ‘prisoner’ on costly standard variable rates.

Large numbers of borrowers are likely to be shut out because the average age of a first-time buyer has risen to 36. In the South West the figure is a startling 41.

The Financial Conduct Authority, which imposed the new rules, has already urged lenders not to adopt a ‘computer says no’ attitude toward older borrowers.

But banks have called for clarity on who they can advance loans to because lending into retirement is a ‘real concern’. ‘Fears of a future clampdown by regulators are preventing mortgage lenders from offering loans that stretch into people’s retirement,’ IMLA said.

The rules are also a problem for those forced by soaring house prices to take on longer-term loans that have lower monthly repayments. Last year half of all first-time buyers opted for loans of more than 25 years, according to the Council of Mortgage Lenders. In 2007 the proportion was less than a third.

Tough restrictions introduced in April have forced lenders to prove their customers will be able to afford to pay off loans. File picture

Lenders also worry about the impact of new pension freedoms that allow the over-55s to access their savings when they like – letting them potentially spend too much, too soon.

Peter Williams of IMLA said: ‘Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year.

‘To avoid a situation where regulation brings about the extinction of mortgage terms that stretch into retirement, we need clarity and confirmation about where the boundaries of responsible lending truly lie.’

Andrew Montlake, a mortgage broker at Coreco Group, said: ‘The new pension freedoms mean it is difficult for lenders to know if someone will have a steady income in retirement or if they will have blown it on a Ferrari. There is no reason they cannot lend to someone in their 70s but they need assurances from the borrower that they will be working until the loan ends.

Those forced to take out shorter loans face steeper monthly repayments. File picture

‘The fact is that if you cannot pay off your loan within 25 years then you are probably borrowing too much.’

The stricter rules were introduced this year in a bid to curb the kind of high-risk lending that contributed to the economic crisis and to ensure people would not be allowed to borrow beyond their means.

Last month, the FCA said pensions were often a ‘very stable’ income and the industry must not use age as an automatic bar to a mortgage.

A spokesman for the FCA said yesterday: ‘The mortgage rules are about ensuring everyone who takes out a loan can afford to repay it. There is nothing in the rules about the age of a borrower. It is about affordability and ensuring common sense in the market.’

IMLA represents lenders who market their products primarily through brokers.

Last weekend the Financial Ombudsman Service said it was receiving more complaints about ageism in mortgage lending.