This week Mortgage Solutions asked our experts what (if anything) would make them take a greater interest in the later life lending market?
Richard Adams, managing director of Stonebridge Group, believes this is one part of the market where the demand for advice is only going to grow.
Shaun Church, director of Private Finance, suggests greater support from lenders is what is most needed to improve this area of the market.
Dominik Lipnicki, director of Your Mortgage Decisions, adds that for a modern mortgage adviser, lending into retirement is a necessity.
Our level of interest in the later life lending market, including equity release, has been high for some time as we recognise the importance of this sector and the growth in demand for products.
You only need look at the UK’s demographics and see the increase in the number of borrowers who are going to be moving past a traditional retirement age with mortgage debt, to know that this is not merely a flash in the mortgage pan.
Certainly, the interest-only time bomb situation has brought this market to the fore but, even as the numbers of those coming to the end of their interest-only terms begins to fall over the next decade, all evidence points to an increase in the numbers of retired borrowers.
Equity release is of course a major area of this market – Stonebridge already has a specific and tailored proposition for dedicated equity release advisers in recognition of how this is different to the mainstream market – and I would suggest advisers (at the very least) consider their involvement in the market, either via offering the advice themselves or teaming up with a specialist firm and referring clients on.
In a very true sense, this is not just about the later life lending market, but about later life advice in its entirety, because older homeowners and borrowers do not just come with lending needs.
If you’re able to provide a later life proposition then you are putting yourself in a much better position, although there are clearly qualification and knowledge barriers to get over in order to be a specialist.
However, it is only likely to be a benefit to put this work in now so as to tailor a proposition that suits later life clients. This appears to be one part of the market where we can only see demand for advice growing.
Later life lending is becoming increasingly important as people live and work for longer. As house prices rise, the average age of a first-time buyer is also on the up, meaning borrowers are more likely to need to access mortgage finance in their 50s and beyond.
From a broker perspective, interest in this area of lending has already been piqued. What’s really needed to improve this area of the market is greater support from lenders.
Most mainstream lenders impose an age limit of 70, although some have recently upped this to 80. There are still a fair few lagging behind, so a widespread increase in mortgage age limits would be welcome.
Later life borrowers should be attractive to lenders. They are more likely to be able to afford lower loan-to-value ratios than their younger counterparts and demonstrate a good history of borrowing.
From a risk perspective, it doesn’t make sense to turn away these types of customers, particularly if they have been with the same lender for a number of years.
Borrowers whose mortgage term will end when they are receiving a pension often need to prove their future pension income as part of the application process, but these projections often aren’t worth the paper they’re written on.
How much a 50-year-old will receive in their pension once they’re in their seventies depends on a number of factors, and some – like pension fund performance – are beyond their control.
Applying more realistic tests will help boost interest and the quality of service in the later life lending market.
We are actively involved in this area of the market already.
The industry has come a very long way in becoming much better and treating the sector as much more of a mainline product. Previously this area was almost looked upon as a sub-prime product.
Rates are good, but it is still a case of if someone is under 70 or so it needs to be a really low loan to value to place a case for us.
Also, having access to mortgage advisers who have the relevant qualifications and experience in this area is particularly important, although that has always been important to us throughout our business.
But we very much buy into the success of the market and we’re not surprised by the huge growth in the later life lending industry – the growth has been phenomenal.
We’re big fans of the area, it’s just a case of as and when we can do it to meet our clients’ needs.
We very much think that for a modern mortgage adviser lending into retirement should be part of the armoury.
For anyone that’s not embracing that already, we don’t see a difference between later life lending and any other product, we should be able to cater for all of our clients.