07 June 2021

Expanding your portfolio to include later life customers

What strategies make good business sense in a post-pandemic world? It goes without saying that having all your eggs in one basket is not advisable. For instance, have you considered how diverse your customer mix is, and whether it incorporates the ever-changing age-based demographics of our society?

Perhaps you’ve established a good mix of first-time buyers and buy-to-let landlords alongside a proactive approach to retaining clients at re-mortgage. But what about a growing population of older borrowers?

If you haven’t considered this customer base and you believe this area of the market belongs with the equity release experts, then maybe it’s time to re-think and diversify.

I can hear you asking, “But why, Danny?”

According to the Office of National Statistics (ONS), they predict a 21 million population in 2021 of those 55 years and over – which works out as nearly 32%. This places those between 55 and 69 at just under 12 million. What’s more, by 2025, the population of those over 55 is expected to grow to an excess of 22.5 million.

We’re all living and working for longer - the recent state pension age increase to 66 for both men and women is great testament to this fact. Another often overlooked yet important dynamic is that we’re living differently – which is having a big impact on those aged 55 and over. So how is that difference in lifestyle playing out?

We’re purchasing and paying off our mortgages much later in life.

For younger people up to age 64, it’s now more common to own a home and still have a mortgage. In fact, it was recently reported that one in ten of today’s mortgage holders don’t expect to be mortgage free before 70. With the average age of a first-time buyer also rising, it’s unlikely that this will change any time soon.

The age of a first-time buyer has risen from 28 to 34 years old since the financial crisis in 2007, while half of mid-30 to mid-40-year olds have a mortgage - a drop from two thirds, 20 years ago.

Our recent survey highlights that 71% of respondents aged between 56 and 64 believe that their age could reduce the number of mortgage options available to them. And our SmartrCriteria data also tell us that searches for interest only, maximum age for interest only, minimum income is rising too. 

For me this highlights a huge need for advisers to consider how they can better serve this market, both now, and even more significantly, in the future.  

Families, households and retirement look a lot different

Today, our children live with us for longer, while divorce and marriage are on the rise for those aged 65 and over.

Needs relating to today’s retirement are also far more complex, in ways that include spending a portion of those years looking after the grandkids, managing the rising cost of living, and dwindling pensions. Perhaps even planning a trip of a lifetime and travelling the world.

More and more older borrowers who are asset rich and cash poor are looking to use their homes to re-finance. This could be to fund kids getting on the housing ladder, to buy a holiday home or to fund a more comfortable retirement. Whatever the reason, many people in this age group are looking for advice and information on the options available to them.

Lenders, particularly those specialising in later life, have been tuning into this for some time, looking to better serve this growing customer base. Many are expanding their product range beyond Equity Release to more mainstream offerings such as the RIO, and more recently Ipswich Building Society combining its standard residential and later life mortgages with no maximum age caps. 

Can the same be said for Mortgage Advisers? 

From some of the conversations I’ve been having with lenders in this sector, it seems there is a reluctance among advisers to add this customer segment into their mix.

When there is a clear need for advice to a growing customer base, my question to you as advisers is - why? And how can we support you to adapt your business model? 

Over the coming weeks we’ll be working with our later life lenders to share information and education on both the changing needs of older borrowers and the products now available to them. Our aim is to help you to consider diversifying your business to accommodate this customer segment. You’ll find the content in Mortgage Club Matters throughout June. We would love for you to feedback if you find it useful and let us know what more we can do.

I look forward to hearing from you.

Danny Belton, Head of Lender Relationships

Sources:

https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationprojections/datasets/tablel21oldagestructurevariantukpopulationinagegroups https://www.finder.com/uk/first-time-buyer-statistics

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/livinglonger/changesinhousingtenureovertime

https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/january2021