The Intermediary – October 2025 - Flipbook - Page 66
L AT E R L I F E L E N D I N G
Opinion
Retirement wealth
is key for older
borrowers
O
ver the past 10
years, the mortgage
market in the
Scoish heartlands
has undergone
a significant
transformation, with loan terms
frequently extending beyond the
standard 25 years, resulting in a
higher proportion of older borrowers.
UK Finance data from Q4 2024
shows that 35,840 new mortgages were
issued to UK borrowers in their 50s
and 60s, a paern that is especially
significant in our heartlands, where
an aging demographic is striving to
sustain homeownership.
Pension possibilities
In Scotland, the share of new
mortgages with 36 to 40-year terms
rose to 19.8% for first-time buyers and
18.5% for home movers in Q2 2024,
reflecting affordability pressures for
those nearing retirement, and with
Scotland’s population aged 75 and
over projected to grow by 341,300
by 2047, these numbers underscore
the growing need for flexible
mortgage solutions.
Amid widespread speculation
about forthcoming UK budget
changes, including potential hikes
in inheritance tax, the introduction
of wealth taxes such as property or
capital gains tax, or reductions in
pension tax relief, older homeowners
have a lot to think about.
Nevertheless, life goes on, and
people need to move for many valid
reasons and increasingly in their later
years. A growing number of those
with retirement assets are turning to
pension wealth to help fund essential
later-life borrowing.
The mortgage industry has already
adapted to a degree with later-life
lending products like Home Equity
64
The Intermediary | October 2025
STEPHEN BROWN
is head of intermediaries at
The Scottish Building Society
Older borrowers
often face affordability
contraints [...] making
it difficult for those
individuals to secure
a mortgage despite
their wealth”
Release and Retirement Interest Only
(RIO) mortgages, but these are not
suitable for everyone.
In Scotland, supported housing for
older people reached 21,085 units in
March 2024, highlighting the need for
more tailored mortgage solutions. For
the ‘pre-retirement’ group, pensionbacked lending remains a largely
untapped option.
Pension-backed lending leverages
personal pensions, including money
purchase plans and Self-Invested
Personal Pensions (SIPPs). UK pension
assets total £3.8tn as of 2023, with
the defined contribution market,
including SIPPs, accounting for
£1.9tn. The SIPP segment, valued
at £500bn, is projected to reach
£750bn by 2030, offering substantial
opportunities.
Practical support
Older borrowers oen face
affordability constraints as traditional
lending criteria focus on current
income, making it difficult for
those individuals to secure standard
mortgages despite their wealth.
Pension-backed lending offers a
solution by leveraging uncrystallised
pensions, funds not yet withdrawn,
as evidence of financial strength and
future repayment capacity.
For instance, a sizeable SIPP, which
may hold diverse investments like
stocks or property, can demonstrate to
lenders that a borrower has significant
assets to support long-term mortgage
payments. This enables asset-rich
but income-light borrowers to access
borrowing opportunities that align
with their financial circumstances,
bridging the gap between traditional
affordability assessments and their
actual wealth.
At the Scoish Building Society,
we’ve already seen how using pensions
as part of the underwriting suite
of solutions can unlock solutions
for borrowers who may otherwise
fall outside conventional lending
criteria. By evaluating elements like
a significant uncrystallised SIPP, we
can support later life borrowers who
are asset-rich but have low levels
of income.
This approach is timely and
responsible. Aging borrowers are
a UK-wide phenomenon and are
one reason why we are seeing these
requests grow beyond our traditional
heartlands.
Looking ahead, pension-backed
lending offers mortgage lenders,
especially mutuals, a way to support
this growing cohort. As upcoming
Budget speculation fuels demand
for debt reduction strategies,
pensions provide a practical tool
to empower homeownership and
financial planning among the
older demographic. ●
