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Overconfident older borrowers ‘need to be protected from themselves’ ‒ analysis

  • 04/11/2019
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Overconfident older borrowers ‘need to be protected from themselves’ ‒ analysis
Intermediaries have warned that some older borrowers are putting their finances in danger by relying on their own research when picking a deal, rather than making use of an adviser.


Research from Legal & General Mortgage Club has suggested a clear age divide when it comes to tapping into an adviser’s expertise in arranging a mortgage.

The firm’s study found that borrowers over the age of 55 were almost half as likely to have used a broker when arranging their last mortgage compared to younger borrowers. It revealed that just 29 per cent of older borrowers sought the advice of an intermediary, compared to 58 per cent of those aged 25-54. 

And brokers have cautioned that a sense of over-confidence may be behind this generation’s reticence in using advisers.


FCA views older borrowers as vulnerable for a reason

Andy Wilson, founder of Andy Wilson Financial Services, said the irony was the older generations were in greater need of sound advice when borrowing than younger clients, as they do not have the time remaining in order to correct mistaken decisions should they opt for the wrong deal.

He added that there have been plenty of changes to the market since some older borrowers last took out a loan, and that intermediaries have a key role to play in bringing them up to speed with those.

The regulator regards older borrows as potentially vulnerable clients for a reason, and some of them need to be protected from themselves,” he concluded.


I know best

Martin Stewart, director of London Money, said there was a degree of some older borrowers thinking they know best, noting that people can get more stubborn and overconfident as they age.

Of course there is a huge risk with that kind of approach, especially as the lenders are struggling to keep their underwriting criteria in step with the change in UK demographics,” he continued.

Stuart Powell, managing director of Ocean Mortgages, noted that many borrowers in their 50s are more tech savvy now, and opting to do their own research into the market.

He added: “The other aspect to note is that by the time you reach 55, there is often a much smaller amount remaining on your mortgage, so they may not want to pay a fee to rebroke their mortgage, especially if the lender has offered them a great rate or they have found one themselves.”


Damage done by past brokers

Paul Flavin, managing director of Zing Mortgages, noted that it was not uncommon for parents to sit in on meetings with first-time buyers, chipping in with “random questions” or warning the borrowers that they do not need protection as soon as the subject is raised, and that as a result it was not a huge surprise that older borrowers were not as likely to make use of intermediaries.

What were brokers like back in the day that their reputation is still there to taint the industry all these years on?” he added.

“Lets just hope they don’t poison the minds of their offspring, offering unfounded opinions from the armchair.”


Getting through to older borrowers

London Money’s Stewart noted that once his firm engages with clients over the age of 55, and explains to them the wider pitfalls of borrowing, they are generally “very glad they went down that route”.

He added: “But I think it is possible that the opposite is true of what many people thought would happen – millennials trust humans more than their phones, baby boomers trust the internet more than humans.”

Kevin Roberts, director of the L&G Mortgage Club, said a lot came down to communication, and urged brokers to ensure that they kept in contact with their clients throughout the course of the mortgage “staying front of mind and adding value without ever overburdening the customer with too much contact”.

He continued: “Social media platforms like Facebook and LinkedIn offer avenues to stay front of mind without spamming clients. Facebook is popular with older customers ‒ over 55s are now the second largest demographic on the platform.

And Powell concluded that while it would be best if older borrowers did get proper advice before making decisions about their home loans, the key was ensuring the over-55s were at least doing something about their mortgage, rather than sitting on an expensive standard variable rate.


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