The Intermediary – March 2025 - Flipbook - Page 65
L AT E R L I F E L E N D I N G
Opinion
Oranges are not
the only fruit
W
hen it comes
to the issue of
affordability,
there is
effectively
nothing new to
see if you are a mainstream mortgage
adviser. The nature of the job is about
determining whether the customer
can afford the mortgage over a period
of time based on their financial
position, what they want to achieve
and where they want to go. Of course,
you’re reviewing affordability right
across the piece before coming up with
a recommendation for your client.
However, when it comes to older
borrowers – and specifically in
the realm of lifetime mortgages –
affordability has not been the go-to
assessment that it will have been for
those operating in the mainstream.
The simple fact being that,
traditionally at least, when it comes
to assessing older homeowners and
whether a lifetime mortgage was
right for them, advisers didn’t need to
assess their ability to pay back the loan
over the term.
Almost all lifetime mortgages on
the market came with roll-up interest,
meaning these products suited – and
still do suit – those older homeowners
who didn’t have the ways or means, or
want, to be able to keep making any
sort of repayment or interest payment.
That was then – and as mentioned,
these products still have their place
in the market – but we must now
acknowledge that these types of
lifetime mortgage ‘oranges’ are ‘not
the only fruit’ available, and instead
advisers have a much wider array to
choose from, with some significant
benefits for those who can, and want
to, make payments.
In the past year or two, we’ve
seen a growing number of product
providers in the later life lending
space, including more2life, offering
a variety of products where the
customer can choose to pay some,
or indeed all, of the interest on their
lifetime mortgage. Not forgeing
those product options which fit more
within the mainstream sector, such
as retirement interest-only (RIO)
or those that offer mortgages to
older borrowers just prior, or into,
retirement. With these products now
readily available, the ability to assess
affordability should be a mandatory
part of the adviser’s role with older
borrowers, especially in that lifetime
mortgage space where there are clear
benefits to be had. For example:
To be able to control the roll-up
of interest for the benefit of the
customer’s estate.
To be able to control the roll-up of
interest to protect the equity in the
home, which may allow them to
use the asset further in the future
should they need to.
To potentially pay a lower rate of
interest, which will benefit both of
the above as well.
Three incredibly important
points, especially because without an
assessment of affordability, advisers
are effectively ‘giving up’ the range
of products which fit this particular
bill – which offer the ability to pay
something in the first place, which
will have an impact on the overall loan
amount, which will have an impact
on the amount of equity le in the
property, which will allow access in
the future, which will result in a lower
interest rate which again will temper
some, or all, of the roll-up.
At more2life, we’ve certainly seen
the benefits of such a product offering,
and continue to deliver a growing
number of Interest Reward products
for those individuals who can, and
want to, pay an amount of interest
during their term.
It’s difficult to ascertain the potential
savings that could be accrued over any
period of time without looking at a
specific individual case, but the reality
will be that any interest payment
DAVE HARRIS
is CEO at more2life
from the customer will have a positive
impact, because it will of course slow
that roll-up procedure, allowing the
customer to access that equity now
and still benefit from house price
inflation in the years to come.
Good outcomes
There is, as always, a regulatory aspect
to all of this, placed within the context
of Consumer Duty and the adviser’s
ability to deliver a positive consumer
outcome. Again, to further emphasise,
if as a later life lending adviser you
are not conducting a thorough
affordability assessment, then without
doubt, you cannot be certain that the
product you have recommended is the
right one. That is a fact, and it should
be considered with every single client.
We understand that assessing
affordability requires a process and
strategy – what to include in terms
of income, needs and wants – but we
at more2life are here to help advisers
with this, via regular webinars and
information which can outline exactly
what does need to be considered and
where the results might take you and
the client.
At the end of the day, without it,
you are effectively flying, if not blind
then certainly with one eye closed.
Ultimately it will be your customer,
and potentially you as the adviser or
firm, who will suffer from this.
Good, positive outcomes are at
the heart of Consumer Duty, and
without a full affordability assessment
of every older borrower, without
access to all the products available
to this demographic, and without
knowing exactly what the financials
say and where they should take the
recommendation, the adviser’s ability
to deliver this for a client is severely
compromised. ●
March 2025 | The Intermediary
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