Speaking on a podcast, Edward Payne, director of Clifton Mortgages, said: “Lending into retirement is a high-risk area, clients on interest-only mortgages in later life is a very high-risk area, but just by pushing lenders to continually write letters to them, and say you’ve got to pay this off.
“If they couldn’t pay it off, they would have paid it off. These are very often customers that have had this mortgage for 20-30 years, often on the standard variable rate [SVR] or not on the best deals that are out there,” he said.
Payne said that these clients had “very good payment profiles” but may struggle to get enough with a lifetime mortgage, pointing to sole survivor income for retirement interest-only (RIO) mortgages as an example of a potential borrowing hurdle.
“Ultimately, I think from a capital adequacy perspective this isn’t a major risk for banks. There are a lot of interest-only mortgages out there, but for those vulnerable old customers that are out there, it makes up quite a small proportion of lending.
“To be allowing lenders to continually send out 20-odd letters saying we’re going take your house off you does not fit in with Consumer Duty from my perspective. We need to take more practical steps to deal with it. If somebody can earn the money, they’ve shown that they’ve got a track record to earn the money, there are institutions out there that will lend to them,” Payne added.
He said that several lenders would go up to 75 or 80 years old, with Family Building Society going up to 90 years old, but it did it in a “responsible way”.
“[Family Building Society] only do it for people who can actually show that they can afford the mortgage and they’re just slightly more creative in terms of the way they view that income and give the customers more credit,” he said.
Calls for more support
Payne said: “I think we need to give older clients credit. Vulnerability and lack of capacity or understanding is not just an age-driven issue, and we need to be treating older clients on their merits.”
Michael Craig, managing director at Brilliant Solutions, agreed that the regulator should get involved and “give black and white indications as to what they’re going to do to support the market”.
He continued that he wanted to see more support from the regulator for lenders like Family Building Society innovating around criteria at the later life end of the market, adding that this could also help stimulate the first-time buyer market as it could facilitate Bank of Mum and Dad lending.
“I think unless more lenders… come in with different ideas and different permutations, how can we best serve our customers if lenders aren’t looking into change?” Craig said.
“We’re no longer in a low interest rate-driven industry. We are now in a criteria-driven industry, which is helping customers with their circumstances which are so much more complex than they were two or three years ago because they have to be, and people’s lives are different,” he added.
Watch the 13:23 video talking about the later life lending sector with Family Building Society. Hosted by Mortgage Solutions’ deputy editor Anna Sagar, with speakers including Darren Deacon, head of intermediary sales at Family Building Society, Edward Payne, director of Clifton Mortgages, and Michael Craig, managing director at Brilliant Solutions.
This is part two of two videos, with a further two videos coming covering regulation and outlook.
