The latest rental figures from Rightmove, for example, show tenants are now paying on average £1,172pcm outside London, which is almost 10 per cent up over the course of 2022. In London it moved up to £2,480pcm – up 5.8 per cent – and, given the huge shortage of supply, the likelihood is it will continue to rise throughout this year and beyond.
Supply shortages in the PRS, plus an increase in tenant demand caused by a rise in the number of households, means that many tenants are staring down the barrel of a situation where the rent they will have to pay far outstrips any mortgage payment they would be making – providing, of course, they can get on the ladder.
That, again, is easier said than done. After all, there is also a shortage of homes to buy, and potential first-timers continue to face a number of obstacles not least the ability to save the necessary deposit, and in recent months with mortgage rates rising, meeting the affordability criteria set by lenders has become more difficult in order to achieve the maximum loan required.
Bank of Mum and Dad to the rescue
Mortgage advisers reading this will be all too familiar with such situations, but for a fortunate number of first-time buyers who might otherwise have to give up on their property-owning dream, there may well be the opportunity to secure support from the Bank of Mum and Dad (BOMAD).
Given the right time to buy a property for many wannabe first-timers was yesterday, then it is certainly an avenue worth exploring.
However, even if there is a willingness to help children or grandchildren, having ready access to any potential deposit monies may not be simple. And that’s where, potentially, later life lending can come in.
As a start, it might simply be asking the question about whether a parent or grandparent is willing to help them with their deposit? If that comes back in the affirmative, it will – most likely – be looking at potential options that do not involve those individuals accessing the equity in their home. Perhaps they can access savings? Or maybe they can act as a guarantor? And these get the client to where they want to be.
But, for some, the opportunity may only lie in the equity stored in their family members’ property, at which point – for some advisers – this could seem like a route down which they are unable to go.
Engaging with advisers
This is where having a strong relationship with a later life adviser could pay dividends for all concerned.
We constantly preach to our later life adviser members to forge as many introducer relationships with mortgage advisers as possible – knowing full well that many do not work in the later life advice sector but may increasingly be seeing clients that have this need.
Conversely, this is the same for mortgage advisers. If you don’t have specialist later life/equity release advisers knocking down your door asking you to work together, then for a start more fool them, but you shouldn’t think a good outcome is to have nothing in place.
Certainly, not when the Consumer Duty is just six months away and the Financial Conduct Authority is going to expect you to be able to show how you provide positive outcomes for all clients, not just those who have an advice need you can satisfy directly.
I think we’re all aware that it’s not just the parents of potential first-time buyers who might benefit from later life lending advice but having (or taking) mortgage debt into your later years or retirement is becoming far more widespread, and you, as an adviser, will need to have a solution available to them, even if it’s not from your firm.
So, firstly, don’t be afraid to ask the question of your clients.
It may be the one that gets them to a solution which buys a first home and saves them money on rent. And, prior to doing that, make sure you have a strong introducer relationship with a specialist later life adviser in place that not only meets your needs but those of the increasing number of older clients (and perhaps their family members) who are ultimately going to benefit from it.
