Many lenders and brokers are missing out on opportunities for those who want to borrow money into the later years of their life. Research from the Office of National Statistics states that the average median age of residents within UK local authorities is projected to increase between 2018 and 2043. The effects of Covid-19 have added complexity to these figures causing life expectancy in 2020 to fall for males to 78.7 years and for females to 82.7 years. It is difficult to predict how the long-term effects of the pandemic will affect these statistics over the next decade. However, the success of the vaccine rollout and overall decline of the pandemic within the UK will hopefully close the gap.
Merits of later life lending
With the last decade’s increase in life expectancy, there should theoretically be more products on the market to meet the demands of an aging population. However, clients and brokers can often struggle to connect with lenders who are inflexible with their income and upper age limit criteria. This can be a significant missed opportunity. When older applicants’ financial circumstances are reviewed holistically, underwriters can garner a far more accurate portrait of risk.
Reasons behind later life lending
We spoke to Jon Lane, Later Life Lending Expert at Kinnison Private Finance to understand the current frustrations for his later life clients. Lane states “People are under the misconception that applicants take out lifetime mortgages as a last resort. In reality, borrowers are simply making smart decisions with regard to their financial planning. This is particularly true for those with dependents. Many applicants want to free up capital to help their children get onto the property ladder or to support a growing family.”
Releasing money to pay for care costs is another key factor in taking out mortgages in later life. Lane cites an example of a previous client who took out a mortgage at 97 so she could continue living in her house and paying for home-based care. Age need not be a barrier to successful lending.
Changing priorities from the pandemic
Lane also talks about the effect of the pandemic on the priorities of later life borrowers. “There’s a definite sense of ‘live for today’ as people have grown frustrated with putting their lives on hold. They want to have access to funds that allow them to take that big holiday or pay for home improvement work. Lockdown has given them time to think about all those future plans and projects they’ve been putting off.” Later life lending offers straightforward access to this capital while retaining the security of staying in the property in question.
Challenges for older borrowers
Many clients who took out Interest only mortgages pre-2008 are now coming to the end of their term. Their incomes may be very different now due to the fact they are semi-retired, taking out their pension or working reduced hours. Whereas some lenders may only supply them with Capital and Interest mortgages (if at all), often this is not suitable for their new financial scenario. Lifetime or interest-only mortgages can offer far more flexibility and security for homeowners who can feel assured that they do not have to sell their home in five or ten years’ time.
Successful lenders in the LLL space
Lane asserts that flexibility is key to obtaining new business from later life lending. He predicts that growth in the space will continue and that lenders need to continue to innovate and adapt their products as the needs of the client base evolves. The ability to speak to an underwriter is also a key attribute for successful lenders. When clients have unusual properties or atypical income patterns, a direct conversation with an underwriter is hugely beneficial to convey the individual details of each application. Lenders can therefore build up an accurate depiction of a borrower’s unique set of circumstances.
Flexibility for later-life borrowers
At Harpenden we have no upper age limits for our borrowers. When we assess each case, we consider every applicant’s individual financial portfolio. Each case is different and we believe it’s important to get a clear understanding of an applicant’s specific motivations and circumstances in order to work out the best solution for their needs. Entering into a dialogue with our brokers is critical to achieve this. It allows us to analyse details that may not be instantly obvious from either paper-based applications or those submitted through our Broker Online portal. Ultimately, a flexible approach is crucial to supporting later-life borrowers achieve their unique goals and ambitions for both themselves and their families.
Graeme Aitken,
Business Development Manager, Harpenden Building Society