Speaking as part of a podcast series, Neil Cadwallader, business development manager (BDM) at Family Building Society, said that in the later life lending space, the products that would traditionally be used would be retirement interest-only (RIO) and equity release products, but the list of products that could be used was “growing”.
He explained: “I think the market is awakening to the fact that those aren’t the only two products that would be ideal for customers – even if it’s not for the end journey, it may be during the journey, because later life lending can be actually viewed as different ages.”
Cadwallader said the regulator would usually see later life lending as borrowers at 55 years of age onwards, and at that time, products like RIOs or equity release “don’t work very well for customers [in that bracket], primarily because, believe it or not, they’re too young”.
“The calculators work against them, and where there’s a joint life case… unfortunately, lenders will normally… take one person away and do that death calculation, so affordability is not based on both members of the couple.
“That is where… lenders like ourselves, who have been lending using interest-only high street products, where we can take up to four applicants and four incomes, and that completely transforms the affordability for that sector,” he noted.
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Cadwallader concluded: “We may not be the end goal, we may be part of the journey, but we can actually provide kind of cheaper interest-only lending to the masses as such, because you can get four people on it, and we can be a segment of that journey going forward.”
Repayment and JBSP deals can help later life borrowers
Stuart Heavens, BDM for the South Coast, added that a “tried-and-tested” repayment mortgage could help some later life borrowers.
He said the mutual went up to age 95 on a repayment mortgage and noted that a lot of borrowers look at interest-only because they feel that they want to minimise their monthly payments.
For example, if a 70-year-old borrower went to a high street lender, they could get a five- or 10-year term, whereas with Family Building Society, they could get up to a 25-year term.
“So even if interest-only isn’t necessarily what they’re looking for, because appetite from broker to broker can vary – as it can with clients – so if interest-only isn’t up their street and neither is a lifetime condition, they can look at the kind of the tried-and-tested repayment mortgage to age 95 that will help minimise the monthly payments and hopefully make it much more palatable for the older borrower who might want to pass on their home as inheritance to their loved ones,” he noted.
Heavens added that JBSP could also help later life borrowers, and the opportunity in this sector would only grow as there was over £1trn of property or equity owned by people who are 75-plus.
