Addressing Later Life Lending needs
The population of the UK has seen significant change over the last few decades with lower birth rates and medical advancements resulting in an ageing population and more people living longer and healthier lives than ever before.
According to figures from the Office for National Statistics (ONS), the number of people aged over 65 in England and Wales rose 20% in the last decade to reach 11.1 million in 2021 with nearly one in seven people expected to be over the age of 75 by 2040.
This shift in demographics marks a significant turning point for the UK with official Government census figures showing there are now more people aged 65 and over in England and Wales than children under the age of 15.
For advisers working in the later life lending market, the UK’s ageing population presents a real opportunity to tap into a growing area of the mortgage market and address the financial needs of these clients.
The last 12 months have proven challenging for many borrowers, with rising interest rates and higher inflation making mortgages more expensive and squeezing the disposable income of many UK households.
In addition, the significant increase in house prices over the last three decades has resulted in higher loan values and longer mortgage terms for many borrowers as the average age of first-time-buyers rose to 34 years old.
This maelstrom of events means many people are now approaching retirement still holding significant levels of mortgage debt. In fact, recent data from Equifax shows that 41% of homeowners are expected to still be paying off their mortgages in retirement, with over a quarter of borrowers anticipated to be over the age of 70 at maturity.
Many of these clients may find themselves approaching retirement financially unprepared in their later years, with a reduced income but continued mortgage commitments forcing them to seek alternative ways to finance their later years.
Catering for the needs of these clients is essential and it is here that later life lending could create opportunities for some older customers looking to capital raise by releasing equity in their home or taking out a new mortgage.
Many people traditionally consider later life lending and equity release to be synonymous, but later life lenders also offer conventional retirement mortgages and retirement interest-only (RIO) mortgages specifically aimed at the over-55s as part of their later life lending solutions package.
These can provide those in, or approaching, retirement with capital-raising opportunities to help family members get onto the housing ladder, to purchase a second property as a buy-to-let or as a holiday home or to simply access a sum of money to help finance their retirement.
Understanding the variety of products on offer is crucial and Consumer Duty requirements mean advisers must now ensure older borrowers get all the relevant and appropriate information they need to make an effective and informed decision about their borrowing requirements.
Working in an equity release silo is no longer an option, which is why having access to a network that offers these products via a range of providers is important as it can provide advisers with the peace of mind they are working in the best interests of the client.
The Right Mortgage & Protection Network, for example, has a dedicated specialist equity release arm consisting of over 100 specialists and provides access to exclusive products not available in the wider market. This means advisers can rest assured they are fully addressing the later life lending needs of their clients.
Being part of a wider network also means there is an option to refer the business to a specialist if the adviser does not want to provide the advice. This leaves the adviser free to focus on other aspects of the business, safe in the knowledge the needs of their client and the demands of the regulator are being fully met.
With the population of the UK getting older and people living longer than ever before, demand for later life lending products is set to increase. Being part of a network can provide advisers with the support they need to tap into this area of the market and offer access to products that can address the retirement financing needs of their older clients.
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Kind regards,
Victoria Wilson
Head of Equity Release
E: joinus@therightmortgage.co.uk