The Intermediary – March 2025 - Flipbook - Page 64
L AT E R L I F E L E N D I N G
Opinion
Adapt, evolve,
succeed: AI and
later life lending
T
he traditional view
of equity release and
lifetime mortgages as
solely an option for
retirees is no longer
the reality. Borrowers
are turning to these products earlier
in life, oen in response to major
financial shis such as divorce or
restructuring. As borrower needs
evolve, lenders must be ready to adapt.
The Equity Release Council’s
(ERC) Q4 & FY 2024 lending data has
sparked fresh conversations across
the sector. While the headlines for Q4
were positive, the annual figures tell a
more cautionary story. Equity release
lending, once a thriving sector, has
seen a decline, with total lending in
2024 expected to be between £2.2bn
and £2.3bn – significantly lower than
its £6.2bn peak in 2022.
At first glance, this might suggest
weakening demand, but the reality is
more nuanced. While overall lending
volumes have dipped due to economic
uncertainty, high gilt yields, and
increased regulatory scrutiny, the
profile of borrowers is evolving.
The market is witnessing a shi
towards younger borrowers – in
their late 50s and early 60s – who
are increasingly using products for
financial restructuring rather than
simply supplementing retirement
income. This signals a broader shi
in how these products are perceived
and used – as a proactive financial tool
rather than a last resort.
For lenders, this shi presents both
opportunities and challenges. The
challenge lies in serving an evolving
borrower base while maintaining
compliance and managing
affordability risks. Traditional
methods of verifying income and
financial stability are becoming unfit
for purpose. Borrowers now present
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The Intermediary | March 2025
more diverse financial backgrounds
– multiple income streams,
pensions, investments, property
wealth. What was once a relatively
straightforward process has become
increasingly complex.
Managing risk
Consumer Duty has placed greater
emphasis on robust affordability
checks, but manual verification
methods continue to slow down
the application process. Right now,
lenders can spend over 30 minutes
per application manually reviewing
income and affordability, increasing
the risk of human error while creating
bolenecks. In a competitive market
where speed and accuracy define
success, the need for a more efficient,
technology-driven approach has never
been greater.
This is where artificial intelligence
(AI) document processing is making
a real difference. Lenders can
streamline income verification,
enhance compliance, and significantly
reduce the time it takes to assess
affordability.
Through automated affordability
and income assessments, employer
verification, and document
integrity checks, lenders can process
applications with greater speed and
accuracy. A process that once required
manual document reviews is now
handled in real-time, allowing lenders
to extract and verify information
from bank statements, payslips, and
tax returns instantly. This not only
improves operational efficiency but
strengthens fraud prevention and
compliance measures.
Approaching affordability
As affordability remains a key
concern for borrowers, later life
lenders must also consider how
ALEXIS ROG
is CEO and founder at Sikoia
to improve the overall customer
journey. Complex processes can
deter potential borrowers at a time
when they need support the most.
AI-driven automation reduces
friction and removes unnecessary
delays. Customers benefit from faster
decisions, greater transparency, and a
more personalised lending experience.
With traditional mortgage lenders
hesitant to expand into the later
life market, specialist lenders have
a unique opportunity. Those that
integrate innovative tech into their
onboarding and underwriting
processes will not only gain a
competitive edge, but be beer
equipped to support borrowers with
increasingly complex profiles.
The road ahead is clear. While
lending figures remain below pre-2022
levels, the long-term growth potential
of the market remains strong. Many
older homeowners have substantial
property wealth that could be put to
work in managing their finances,
restructuring debt, and supporting
the next generation through
intergenerational lending.
The demand for later life lending
solutions will continue to grow, but
only those lenders that embrace digital
transformation will be able to meet
it effectively. By empowering lenders
with faster, more accurate loan
processing with help of AI-powered
document processing solutions, and
seamless automation, we can build
a more efficient and scalable later
life lending market. The firms that
recognise the value of AI today will be
leading the industry tomorrow.
Later life lending must evolve,
and so must the tech that supports it.
Those that adapt now will shape the
future of the sector. ●
