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Lending into retirement sector most ripe for growth in 2016

  • 13/05/2016
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Later life lending is predicted to be the biggest growth opportunity in the mortgage market this year as brokers expect lenders to refocus their support for older borrowers.

An online Mortgage Solutions poll of 142 readers found that 37% of respondents believe lending into retirement will show the most promise this year, just ahead of remortgaging which attracted 36% of the vote. A further 19% expect the first-time buyer market to see the biggest uplift this year, while just 8% think it will be second charge loans.

In the last month alone, two of the big five lenders have updated their lending into retirement policies. This week saw Nationwide increase its maximum age at the mortgage term-end from 75 to 85, while both Halifax and Nationwide amended their affordability criteria to allow applicant income beyond the state pension age, up to a maximum working age of 70.

Paul Broadhead, head of mortgage policy at the Building Societies Association (BSA), said the results were unsurprising.

The BSA launched a year-long review in November looking at age caps on mortgage lending within the mutual sector, with every society committing to review its lending limit.

Broadhead added that the banking sector was also beginning to roll out changes in support of older borrowers.

“I think we will see more lenders focussing on this area over the next year or so, for many borrowers retirement is now seen as a process rather than a single event. It is welcome that the FCA is targeting the demographic changes and plans to publish its Ageing Population Strategy in 2017; this will be important to give lenders the confidence that they can innovate to meet changing consumer needs,” he said.

Richard Adams, managing director of Stonebridge Group, said the findings were an indication of the amount of advisers dealing with clients that fit into the older borrower category.

He explained that while lenders were beginning to adopt a more ‘common-sense’ approach to lending into later life, it was up to the bigger players in the market to lead the way.

“We should not forget that mainstream lenders may be able to find a little bit more margin with these types of products and that might well propel the sector forward,” Adams said.

“I suspect all lenders will be involved in this sector in the coming years, however it will probably need some significant underwriting expertise and ability in order to satisfy on affordability, and perhaps also satisfy the regulator.”

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