The Intermediary – April 2025 - Flipbook - Page 56
L AT E R L I F E L E N D I N G
Opinion
Time to think about
older borrowers
more carefully
T
his year has seen stiff
competition between
the market’s biggest
lenders, with several
offering rates more
than half a percentage
point lower than the base rate. This
has generated lots of headlines, but it’s
worth reminding ourselves that rates
under 4% are just that – headlines.
They’re typically available to the safest
of safe borrowers on the lowest loanto-values (LTVs).
As a building society, we remain
commied to understanding not
just our own customer base, but also
borrowers currently underserved
by the market more widely. Oen,
these borrowers still need and deserve
access to mortgage finance. It’s
just that systems, aggregators and
affordability models don’t do justice to
understanding their personal financial
circumstances, which is interesting,
given that this is such an integral part
of the mortgage advice process.
We’ve commissioned detailed
research into how the market serves
so-called ‘older borrowers’. We hope to
share the finished report with you in
May, but we’ve got some early insights
worth thinking about now.
Who are you calling old?
At the moment, there’s a general
consensus that later life begins at 55.
That’s when you can access equity
release, and it’s when most people
are able to consider drawing their
personal or workplace pension.
However, 55 is 11 years before the
current state pension age, which is set
to rise to 67 between April 2026 and
March 2028, and to 68 between 2044
and 2046 for those born on or aer 5th
April 1977.
In addition, according to the Office
for National Statistics (ONS), the age
56
The Intermediary | April 2025
where more than half of people were
retired increased from 64 in 2011 to
66 in 2021, and we believe this age
will only continue to rise with longer
life expectancy, beer health and the
desire to enjoy the time we have le.
Life expectancy is now 78.6 years
for men and 82.6 years for women. As
life expectancy increases, the length of
life aer retirement is going up. ONS
figures show that in 2022, there were
around 12.7 million people aged 65 or
over in the UK – 19% of the population.
By 2072, this could rise to 22.1 million
people, or 27% of the population.
Understanding borrowers
People are living and working longer,
and there must be a fundamental shi
in mindset if we’re to support this
group of older borrowers effectively.
As an industry, we perhaps don’t
give enough nuance to the changing
needs of these customers over
the different stages in their lives,
especially when we compare them to
other types of borrowers.
We know the plight of renters and
their struggle to save large enough
deposits. We understand how to give
families the opportunity to use their
own finances to support the younger
generation, and we have an acute
awareness of first-time buyer needs.
While we’re starting to think about
the journey for older borrowers,
and advisers are oen aware of a
customer’s needs up to and beyond
retirement, there are currently a small
number of lender products which
offer suitable solutions.
This limitation is hampering the
industry’s ability to deliver on the
Consumer Duty to help consumers
achieve good financial outcomes.
Broadly speaking, at present,
the later life lending market offers
standard residential mortgages to
KATHY BOWES
is intermediary manager at
Cambridge Building Society
some borrowers, with upper age limits
usually between 70 and 85 years at the
end of the mortgage term.
Retirement interest-only (RIO)
mortgages, for example, have no
set repayment term – the mortgage
is repaid when you sell the existing
residential home, move into care or
pass away, with interest payments
continuing throughout the loan term
Then there is the more widely
recognised equity release lifetime
mortgage, available from age 55, with
an increasing range of repayment
options, including interest roll-up
or interest payments for a fixed term
converting to roll-up at a later date.
These products do the job
they’re designed for, and in many
circumstances do meet the needs of
the borrower.
We don’t currently understand how
oen older borrowers ask for equity
release, but are redirected to taking a
standard mortgage they didn’t know
they could afford. We don’t record
how many ask for a mortgage, but
are turned away because an adviser
isn’t qualified to understand their
income complexity. We don’t know
if borrowers are taking out a lifetime
mortgage because they believe it’s the
only solution available to them.
What we do know is that older
borrowers are a growing market,
needing more thought, education
and innovation.
To ensure sensible and responsible
lending, an adviser must be able
to address all of their customer’s
needs, and lenders should consider
offering a more flexible and tailored
underwriting approach. ●
