01 June 2024

An overview of the later life lending market

By Darren Deacon (Head of Intermediary Sales), Paul Roberts (Senior Account Director) & Nathan Waller (Business Development Manager) at Family Building Society

Figures in recent years suggest that the value of later life lending annually exceeded £28 billion, which shows it’s not a small area of the market - it’s a significant proportion - and is very much expected to grow. The population is getting older, and affordability is generally getting harder. “There’s a big demand for later life lending, though a lot of education is needed within the sector,” suggested Darren Deacon, Head of Intermediary Sales at Family Building Society. “The sector itself arguably had a poor reputation in the past for maybe having a few sharks circling around in it, particularly with equity release, and there was a sense of customers being vulnerable.”

Deacon believes that some people may feel trapped on interest-only mortgages, which date back as far the 1980s, in some cases – he suggested - due to the endowment miss-selling.

In later years and in other circumstances where borrowers took out an interest-only mortgage, those mortgages are now coming to an end. Some high street lenders may refuse to extend them or to offer another product and want their money back. A broker who’s not fully aware may take them straight down the equity release route, but there might be other, better options.

Nathan Waller, Business Development Manager (BDM), advised: “I think it’s key for brokers to be able to have a wider understanding of the whole market so that they’ll be building long-standing relationships with clients throughout their lifetimes. There’s a duty on the broker, especially as a whole of market broker, to at least have the awareness that there are lenders such as us out there who can help.”

For example, older clients can access any of Family Building Society’s standard product range, with the same criteria as any other applicant type. They also offer a Joint Borrower Sole Proprietor (JBSP) arrangement where parents and grandparents can support a mortgage application to help them get on to the property ladder or take that next step up. This arrangement also has a unique twist: it can be reversed. Adult children can help their parents in the same way, so that they are able to stay in the family home. And as they lend up to age 95, this can be a very affordable option.

“Mortgage advisers and customers, themselves, need to better understand the available options today for lending into later life, and how we carefully scrutinise applications” said Paul Roberts, Senior Account Director at Family Building Society.

“Our BDMs have heard stories where clients say, ‘I didn’t think I could get a mortgage past the age of 70’ – there are standard mortgages which are available until a client is 95 years old. We need to get that message across to both parties. We underwrite with a very keen eye on vulnerability, though we do that with any application, so we wouldn't restrict that just to later life borrowing - we would do that at any age.”

Following on, Roberts concurred that Family Building Society’s personal contact with advisers was important; that its tailored and hands-on approach ensured that, wherever possible, it met clients’ individual borrowing requirements.

“We just need more intermediaries to embrace later life lending - it will make life easier for them and their clients,” he said.

Roberts added: “I think the biggest issue for some of the high street lenders is that these are older borrowers, and they don’t have employment income, be it self-employed or employed. They often have pension income and modern credit scoring systems can’t quite cope with that. However, older customers are generally safe bets… they have fixed pension income or pension pots and investments which are effectively guaranteed, and most of our clients may well be below 60% loan to value.”

Despite the evident growth of the later life lending market, it has faced its challenges in recent months, in common with many sectors of the industry. “The one thing that has affected some of the scenarios we see has been the affordability - it is tighter,” Waller acknowledged. “We have to be reasonable and cautious, to ensure that mortgage payments are as affordable now as they will be in the future.”

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