Breaking down the silos in later life lending – Diamond

This singular focus has not only limited growth, but has also misled consumers and brokers about the true breadth of options available to those over 50.

I believe it’s time for a change – a shift toward collaboration and innovation that rethinks the way we talk about later life lending and the naming conventions we use, overcomes systemic obstacles, and ultimately benefits everyone involved. 

For too long, later life lending has been pigeonholed as solely about equity release.

In reality, four out of five products sold to the over-50s market are non-equity release offerings, including retirement interest-only mortgages, interest-only, and capital and interest options. This not only distorts the market’s true potential but also prevents borrowers receiving advice on the full spectrum of later life lending available to them. 

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Overcoming key obstacles in the current landscape 

Several obstacles are holding back the industry:

• Regulatory and naming constraints: Outdated regulatory frameworks and naming conventions continue to reinforce a narrow view of later life lending. The inconsistent definition of ‘later life lending’, often conflated with equity release, creates confusion among consumers and brokers alike. Clear, independent definitions are critical for ensuring that the full range of lending options is recognised, as well as for complying with modern regulatory expectations such as those outlined in the Financial Conduct Authority’s (FCA’s) mortgage conduct of business regulation (MCOB) rules regarding fair treatment, suitability, and affordability. 

• Fragmented sourcing systems: Most current sourcing platforms are product-specific and often favour established players. They also don’t allow brokers to search for options they don’t know exist. So, if brokers are only searching for equity release, that is all they will find. This fragmentation makes it difficult for brokers to access a comprehensive suite of lending options, thereby limiting their ability to serve clients effectively. 

• Commission bias: Higher commissions on equity release products may inadvertently influence recommendations, sometimes leading to advice that isn’t the best fit for the borrower.

These challenges, if left unaddressed, not only complicate the process for brokers but also result in suboptimal outcomes for consumers who simply want the best solution for their unique and evolving circumstances. 

Fostering collaboration and innovation

Lenders, brokers, and regulators must work together to break down traditional silos to improve the later life lending industry and better serve consumers.

Collaboration, rather than competition, should be our guiding principle.

Here’s how we can get there: 

• Unified naming and product strategy: We need to realign how later life lending is defined. By moving away from the focus on equity release and embracing the broader range of products available, we can better serve our customers and capture untapped market potential. Importantly, refining naming conventions is key. The term ‘later life lending’ should be clearly defined – distinct from equity release – to avoid confusion, ensure unbiased advice, and meet regulatory expectations. An open forum involving industry players and regulators can help establish these clear definitions and naming standards. 

• Embracing technology: The integration of advanced technologies such as artificial intelligence (AI)-driven underwriting models can simplify the process, streamline risk assessment, and enhance customer outcomes. The LiveMore Mortgage Matcher is a prime example of how sourcing can be improved to offer brokers advice on the range of options available to customers, regardless of what they might originally have searched for. 

• Customer-focused outcomes: Instead of obsessing over incremental increases in market share, we should concentrate on continuing to expand the market as a whole, which is currently enjoying significant growth. When brokers have access to a full suite of options and when regulatory frameworks support innovation, the end customer always wins. 

The advantages of a collaborative approach in later life lending are clear: 

• Enhanced customer outcomes: A unified market allows for a more accurate match between product and customer needs, ensuring that every client receives a solution tailored to their situation. 

• Market expansion: By breaking down product silos and adopting a more inclusive naming convention, we can open up the market to a wider customer base, including the mainstream mortgage sector. 

• Efficiency and compliance: A shared, neutral sourcing platform reduces administrative burdens and ensures that the industry adheres to modern regulatory standards and consumer duty requirements. 

• Innovation-driven growth: Collaboration fosters an environment where innovation can thrive. By working together, we can invest in new technologies and product developments that benefit all stakeholders. 

The challenges facing later life lending are surmountable if we commit to a shared vision of collaboration and innovation. It’s time to break free of outdated silos and work collectively to redefine our industry for the benefit of brokers, lenders, and, most importantly, the end customer.

Let’s harness our collective expertise, embrace new technologies, and build a more integrated market that truly reflects the needs of today’s consumers.