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Duncombe: Lenders should remove age limits and rely on affordability

by: Jeremy Duncombe, managing director of Legal and General Mortgage Club
  • 17/07/2017
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Duncombe: Lenders should remove age limits and rely on affordability
Lenders and brokers alike are clearly waking up to the growing interest among older homeowners for borrowing into later life.

Of course, it’s not altogether surprising. We’re all living longer, and many of us are taking our mortgage debt into retirement or looking to do more with our cash, such as invest in a new property in later life.

At the same time, we regularly see figures, including Legal & General’s own Last Time Buyers report, telling us that over-55s will soon hold over a trillion pounds in housing wealth.

Without a decent supply of properties to move into as just 2% of the UK’s housing stock is purpose built for retirement, these individuals are turning to other means to unlock that equity, such as lifetime mortgages.

The industry should be commended for what it has done so far.

We’re certainly seeing more brokers taking an interest in older borrowers and more lenders joining the later life lending market or increasing the maximum age limits on standard residential ranges.

Mainstream lenders and smaller building societies are starting to raise their age limits to 80 years old and beyond, giving older borrowers the chance to remortgage or even help them finance downsizing.

 

More to do

However, there is much more we need to see for the market to reach its full potential and meet the needs of older homeowners.

First, if we want to bring later life lending into the mainstream, more lenders must look to increase the maximum age limit for borrowers, or even remove it altogether.

The upper age limit is arbitrary, so lenders could remove it altogether and just rely on their own affordability rules and the customer’s ability to pay.

It’s vital we see innovative new products to meet the varying needs of older homeowners. Lenders like Hodge Lifetime are leading the way, developing over-55 interest-only mortgages to help older borrowers, whether they are purchasing, remortgaging or just looking to raise capital.

Others, such as Family Building Society, have also taken strides to develop products that cater to the later life segment, including an interest-only mortgage that provides customers with a lump sum or monthly advance.

We also need to encourage more intermediaries to embrace the lifetime mortgage sector and offer advice on equity release alongside the more mainstream products.

After all, accessing equity is no longer just a solution for retirement, but also a product that can transfer wealth through the generations.

 

Accessing cash

More and more equity release customers are accessing the cash tied up in their home to help their loved ones onto the housing ladder.

Legal and General’s Bank of Mum and Dad research found equity release has the potential to help as many as 442,900 individuals onto the property ladder, if those considering taking out a lifetime mortgage this year actually went ahead with it.

Big names such as Legal and General Home Finance have entered the market in recent years, helping drive rates down to below 4% and meaning that equity release is a viable option for more and more borrowers, but we also need to see more advisers turning to this market as well.

There are many intermediaries out there that already hold the qualification to advise on equity release, but still steer clear of this market.

Their support is crucial to helping this sector reach its full potential. Advisers that choose not to join this growing segment of the wider mortgage market are surely missing out.

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