The Intermediary – June 2025 - Flipbook - Page 61
L AT E R L I F E L E N D I N G
Opinion
Make it easier to
say yes to older
borrowers
A
s the UK’s population
ages and house prices
keep rising, the role
of the mortgage
market in supporting
those who own
homes is becoming larger and more
systemically important for society.
While there has been innovation in
the market that serves older borrowers
– with the launch of retirement
interest-only (RIO) mortgages and
more flexible lifetime mortgage
options with both drawdown
and repayment terms – there is,
nevertheless, further to go.
In May, the Financial Conduct
Authority’s (FCA) Emad Aladhal,
director of retail banking, delivered
the keynote speech at this year’s
Building Societies Association (BSA)
Annual Conference. Announcing
the publication of the Mortgage Rule
Review (MRR) consultation paper,
which proposes some relaxation of
affordability assessment in like-forlike or similar refinancing, Aladhal
drew specific aention to the market
for older borrowers.
It was gratifying for all of those in
the audience, the majority of whom
have been commied to the mutual
lending sector for many years, to hear
such praise of the work we do to serve
customers who are underserved.
He said: “For 250 years, building
societies have led the way in the
mortgage market, providing
community-driven and innovative
financing to fulfil the ambitions of
aspiring homeowners.
“We need a market that can serve
everyone…as term lengths extend and
the average borrower gets older, later
life lending is no longer a niche, but
increasingly the norm. We all need
to face up to the complexities – and
opportunities – of increased consumer
need to continue borrowing into later
life. To make the changes meaningful,
we need you – the industry – to take
up the gauntlet of innovation, to use
the flexibility we aim to create, to
make meaningful progress for our
communities.”
He’s right – the ability to serve older
borrowers, especially those who still
require finance aer their retirement,
has not been straightforward.
Yet there are plenty of us who
have gone out of our way to consider
the challenges that exist and try to
provide solutions.
New solutions
The proposals set out by the FCA
in its Mortgage Rule Review look
particularly encouraging for
borrowers who need – or just want –
to extend their term borrowing past
their conventional retirement age.
The way we work and how we retire
has changed beyond recognition
over the past 30 years – we agree
wholeheartedly with the FCA that
it’s about time we had a regulatory
environment that reflects this.
Relaxing the strict affordability
assessment rules brought in aer the
Global Financial Crisis does not mean
abandoning all reason or sense. Rather
the opposite, in fact.
The consultation paper says: “We
propose to remove the requirement for
a full affordability assessment when
reducing the term of a mortgage. This
would make it easier for consumers
to reduce the term of their mortgage,
where it is appropriate for them.
“This would, among other positive
effects, reduce the risk of borrowers
being unable to meet contractual
repayments later in life, where
lifestyle changes are likely.
“By removing the prescriptive
requirement, firms would be able to
KATHY BOWES
is intermediary manager at
Cambridge Building Society
The way we work and
how we retire has changed
beyond recognition over
the past 30 years”
determine what form of assessment
would be proportionate to the
customer’s needs.
“Firms would need to meet their
obligations under the Consumer Duty,
in particular to act to avoid foreseeable
harm to retail customers and to equip
them to make effective and properly
informed decisions.
“We still expect firms to consider
affordability in line with the
Consumer Duty/PRIN 2A and a firm’s
responsible lending policy where it
chooses to make use of the changes.”
An eye on innovation
The industry is currently locked in
debate over the potential implications
should these plans become a reality.
Yet, lenders are already thinking
ahead of the curve.
Building societies already account
for 57% of retirement Interest-only
mortgages. Meanwhile, innovation is
woven into the history of this sector –
you only have to look at the lending we
already do for retired borrowers.
There will always be a need for a
range of options, and not all borrowers
have the same circumstances or
objectives. We look forward seeing the
final proposals, as these could ensure
that lenders like ourselves are able to
introduce more innovate solutions for
the ever-increasing demand for later
life lending. ●
June 2025 | The Intermediary
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