The Intermediary – May 2025 - Flipbook - Page 63
L AT E R L I F E L E N D I N G
Opinion
Navigating rate
volatility in
later life lending
I
nterest rates always fluctuate,
but 2025 is shaping up to be a
year defined by extremes. On
one April day alone, gilt yields
moved from their lowest point
of the year to the third highest
within hours.
For advisers in the later life
lending sector, this kind of market
volatility may present a more acute
challenge, and certainly needs to be
factored into client conversations and
product recommendations. The core
dilemma for many is no longer just
about finding the cheapest rate at the
time of application. It’s about building
plans that can adapt.
As expectations rise around
Consumer Duty and the regulator
places more emphasis on affordability
and suitability, advisers are being
encouraged to take a more nuanced
view – not just of products, but of how
those products fit a client’s evolving
financial picture.
Interest reward
One development making this easier
in the later life space is the emergence
of Interest Reward discount models.
These options offer rate reductions
for clients who are able and willing
to pay all or some of the monthly
interest, creating an incentive for
borrowers to reduce long-term costs.
In some cases, these discounts are
applied dynamically, reflecting both
the payment level and duration,
while others offer a more structured
approach tied to defined terms and
repayment commitments.
Price has rarely been the sole
determining factor in lifetime
mortgage advice. Traditionally,
features like early repayment charges
(ERCs), inheritance protection,
drawdown flexibility, and medical
underwriting have carried more
weight. However, with an increasing
focus on affordability and more
clients opting to make interest
payments, pricing is becoming
a more critical element in the
recommendation process.
The challenge for advisers is that
these rates are now more sensitive and
may only be available for a short time.
This means advisers must stay alert
to rate movements and act quickly to
secure appropriate deals for clients
before they’re withdrawn or repriced.
What makes this model especially
useful is its ability to inject some
personalisation into what can
otherwise feel like a reactive advice
process. Where interest rates can
change quickly, locking in a bespoke
discount based on client-specific
affordability helps advisers offer
something more resilient and tailored,
and in many cases, more defensible in
terms of long-term value.
It also offers a subtle shi in
client mindset. Rather than treating
lifetime mortgage rates as fixed and
unavoidable, advisers can show clients
that their actions can shape the overall
cost of the loan.
Bespoke brokers
The push toward personalisation
isn’t just happening on the borrower
side. Advisers are increasingly being
offered more bespoke experiences
when it comes to lender interaction.
In this context, our lending service
models are evolving in parallel.
We have recently enhanced ours to
include tools providing early-stage
case triage, such as pre-valuation
reviews or indicative underwriting
checks. These enable advisers to gauge
the likely success of a case before
commiing to a full application
With a dedicated support
framework, particularly for more
DAVE HARRIS
is CEO at more2life
complex or affordability-driven cases,
advisers have more options to align
our expertise with their client’s needs.
This adds up to a more agile later
life lending market, one in which
advisers can begin to assemble not
just a product recommendation, but a
holistic strategy that boosts retention.
In a Consumer Duty context,
this is vital. Showing that all viable
options have been considered, that
affordability has been assessed, and
that the long-term implications of a
decision have been clearly outlined, is
becoming standard, not exceptional.
Not forgeing the benefits to be
accrued in terms of income by being
fully active in this space.
Of course, there’s still a place for
fixed-rate, roll-up lifetime mortgages,
especially for clients with limited
income or complex priorities. But for
those with the ability to make interest
payments, the growing range of
affordability-linked options opens up
new opportunities.
Understanding the mechanics of
personalised pricing and the service
propositions behind them will be
essential. So, too, will be the ability to
communicate the benefits and risks to
clients in a clear way.
As the later life lending market
matures, so too does its complexity.
But with that complexity comes choice
and opportunity for advisers.
In a year in which there is more
volatility, there’s something
reassuring about being able to offer
a solution built around a client’s
personal situation, rather than the
pace of the market. Personalised
pricing and bespoke adviser support
might not eliminate change, but
they certainly help put advisers
back in control. ●
May 2025 | The Intermediary
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