01 June 2024

How Later Life lending can support first-time buyers

By Heather Crinion, Operations Director at Marsden Building Society

The housing landscape is constantly changing, with recent years witnessing the largest surge in bank rates since 2008. Not to mention, the average house price in the UK now stands at £280,660, according to the UK House Price Index*.

It’s no secret that rising costs are a significant contributor to the challenges faced by first-time buyers. Saving a sizeable deposit can be overwhelming if you’re already juggling increased bills and living costs. However, this is where we believe later life lending could help.

The Bank of Mum and Dad has long been considered a crucial lifeline for younger buyers looking to take those first steps onto the property ladder. Now, when you consider that the English Housing Survey** reported an average age of 34 for first-time buyers in the UK, it’s a reasonable assumption that parents of those first-time buyers may be approaching or already enjoying retirement.

The English Housing Survey also revealed that the proportion of first-time buyers relying on help from family and friends has risen significantly, jumping from 27% in 2021-22 to 36% in 2022-23. This trend highlights the growing dependence on the Bank of Mum and Dad.

For those parents seeking to assist their children in buying a property of their own, later life lending could be an ideal solution. As a specialist lender, our Later Life mortgages are designed with homeowners, aged 55+, in mind.  By allowing borrowers to access a portion of the value tied up in their homes, they can provide much-needed financial assistance to their children without sacrificing their retirement security.

This support could, in turn, contribute to a healthy level of demand in the first-time buyer housing market, which is crucial in the face of the government's ambitious target of building 300,000 homes per year.

Meet Richard: Case study

A couple who benefited from our specialist solutions are 67-year-old Richard and 58-year-old Rose. They had come to the end of their term with their existing lender and were looking for a £-for-£ remortgage on an interest-only basis. While they planned to downsize in the future, staying in their existing home for as long as possible was important to them.

They wanted to borrow £315,000 on their property, which is worth £625,000. Rose was paying into a private pension and is currently working as a director for an accountancy firm earning a basic salary of £51,500. Richard is semi-retired and working as a shop assistant, but also receiving his state pension of £11,500.

We’ll accept a variety of income streams to help support your clients and, in this scenario, we were happy to accept Rose’s earned income and Richard's pension income. As a result, we were able to offer a term of 17 years on interest only. Also, as the clients were requesting a £-for-£ remortgage, we could offer them 5x income multiples as the case passed affordability.

Understanding the risks

Whilst mortgages for those aged 55+ could have many benefits, it’s equally important to acknowledge the potential risks. Later life lending products need careful consideration, and it's vital that borrowers fully understand the financial implications before taking out a new mortgage.

This is why lender-broker relationships are incredibly important, especially with complex cases such as the Bank of Mum and Dad. To further support our members, we work with a network of knowledgeable brokers who help ensure all our later life borrowers have the information they need to make informed decisions. It’s important that our solutions not only meet a borrower’s specific requirements, but they must also align with their financial circumstances.

Ultimately, later life lending could offer a win-win situation for eligible borrowers. It empowers parents to support their children, while simultaneously fuelling the housing market. Therefore, helping to build a healthier and more balanced property market for future generations.

*Land Registry – House Price Index UK, February 2024

**English Housing Survey (2022-2023)

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.