Footloose and mortgage-free: Vivien Goldsmith examines lending prejudice against single people

YOUNG couples living together may be charged more than older married couples under radical proposals being considered by some building societies.

The societies are preparing to charge borrowers different rates according to their risk profile.

Tony FitzSimons, chief executive of Bristol & West Building Society, said the difference between the mortgage rate offered to the best-risk customers and those judged the worst risk could be as much as 4 percentage points.

The society, which has 2.9 per cent of its borrowers 12 months or more behind with mortgage payments compared with an industry average of 1.16 per cent, has already looked at its lending book to pick out the type of borrowers who get behind with their mortgage payments more frequently than average.

Unmarried couples living togther and young people sharing a flat or house come out as most likely to be poor payers.

But Bristol & West still has to do more research to assess the relative importance of different factors in predicting bad risks. 'We then have to devise a proposition which reflects that, and it has to be acceptable in the market place.'

Eamonn Ferrin, marketing development manager of Bradford & Bingley Building Society, said that its lending experience was similar to Bristol & West's. 'A single young man is a high risk. Women are better payers than men - very much so.'

'But we have no immediate plans to change our policy. We would have to review the broad economics of anything we did.'

Bradford & Bingley has already developed a credit scoring system for mortgage lending. But at the end of the examination, there are only two possible answers - 'yes' or 'no'. Under the proposals mooted by Bristol & West there would be the option to grant a mortgage, but at a higher rate than normal.

Mr Ferrin said it would be difficult to put an effective policy into practice. 'We can't charge men more than women, that would be against the Sex Discrimination Act. It's a minefield. We have to consider things very carefully before we do anything.'

Building societies are already, in effect, selecting borrowers by offering discounts. These were first introduced for larger loans, and then for borrowers who had a substantial deposit. This tends naturally to select the older, richer borrower and deter the younger, first-time buyer.

A spokeswoman for Cheltenham & Gloucester Building Society, which launched a 2 per cent discount for one year for borrowers wanting no more than a 60 per cent advance, and a total loan of no more than pounds 60,000, said: 'It would seem that the Bristol & West are hoping to attract the sector we have already addressed. But they are turning it on its head by loading. It does not appear to be a subtle approach.'

Abbey National now makes new borrowers go through a budget planning exercise to check that they can afford the mortgage payments. It also uses credit reference agencies to check a borrower's history.

An Abbey spokesman said it would not necessarily be right to concentrate on lending to older, married couples. 'The divorce rate is very high, that's one reason why we have had so many repossessions. If a couple are expecting a child it can cause financial strain. It's dangerous to generalise. We must also remember that older people were once first-time buyers, and first-time buyers are important to stimulate the housing market.

John Wriglesworth, housing analyst at the stockbrokers UBS Phillips & Drew, said the housing market needs first-time buyers. 'These are just the people who would be squeezed by the policy proposed by the Bristol & West. Having to find a 5 per cent deposit makes things difficult enough. It would be awful if things got out of hand and if you had a punk hairstyle you would be charged extra, so everyone woulds have to dress up in a suit before visiting a building society.'

Peter Robinson, managing director at Woolwich, said that recently 70 per cent of repossessions involved single people, mostly without children. But he attributed this to the rush to beat the Lawson budget move in 1988 to ban multiple tax relief .

'Relationship problems have not been brought to our attention in the past as house price inflation allowed us to sell up and unwind things. We can no longer rely on rising prices.'

But he said Woolwich had no intention of prying into people's relationships.

Alliance & Leicester said it was aware certain catagories of people were more likely to default on their mortgages, but said it was unwilling to charge them a differential rate.

'If we decided that someone was a bit doubtful that would be reflected in the amount of money that we would be willing to lend them and in the loan-to-value ratio,' an A&L spokeswoman said.

Halifax, Britain's largest mortgage lender, has no plans to change its lending policy.

The Equal Opportunities Commission is in favour of credit scoring. A spokeswoman said it tended to result in fairer judgements. There is no law that prohibits mortgage lenders from discriminating on grounds of marriage. 'We would want to watch any developments in this field very carefully.'

(Photograph omitted)