29 December 2023

Enhanced affordability requires nuance

By Vida Homeloans

The UK government conducts a census every ten years to create a snapshot of the population and a record of demographic trends across the nation that are used to comprehend and create social policies.

The most recent was performed on March 21, 2021[1], and the first datasets from it—with Scotland and Northern Ireland's data separated from England and Wales—were published at the end of June last year.

The initial assessments conducted by the Office for National Statistics do illustrate, and in some cases confirm, how British society has changed over the previous ten years, even if you don't find reading reams of statistics to be particularly interesting. There is no doubt that it changes every day.

The 2021 census figures show the size of the usual resident population in England and Wales was 59,597,300 - some 56,489,800 in England and 3,107,500 in Wales - the largest population in this jurisdiction on record with over 3.5 million more people living in England and Wales than were in 2011.

We all know the UK population is aging and with modern medicine improving life expectancies, it’s no surprise that the 2021 census showed there were more people than ever before in the older age groups. According to the data, the proportion of the population aged 65 years and over last March was 18.6 per cent, up from 16.4 per cent in 2011.

But that our population is aging and growing is just one dynamic. As they do, so their behaviour and expectations understandably change too. One-person households (those living alone) are the second most common type of household, accounting for almost 1 in 3 (30%) UK households in 2022. The majority (53%) of these households were women living alone. 70 per cent are women over 65[2].

Brokers and lenders are able to get a very accurate and immediate sense of how people are faring across the nation by conducting affordability assessments, assisting clients in making the best possible presentations of their income and creditworthiness, and having to deliver the news that no hopeful borrower wants to hear: a mortgage has been declined.

Lenders are now faced with a decision. Do we continue to follow the same guidelines, trying to fit fewer square pegs into more round holes? Or do we decide to rethink our claim? We think the latter. We’ve increased our maximum age at the end of mortgage term to 80 years old and will consider lending to an applicant’s 80th birthday based on their current income, where the applicant is under 50 years old, they are at least 10 years from retirement, and they are actively contributing to a pension scheme. Additional applicants outside of this can be considered too and we have extended the maximum potential mortgage term from 40 years to 45 years.

Economic change on the scale we are seeing today changes people, their priorities and their behaviour. Lenders need to adapt too.

[1] https://census.gov.uk/census-2021-results

[2] Age UK. Later Life in the United Kingdom. Age UK (2012) http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/ Later_Life_UK_factsheet.pdf

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.