Executive suggests millions of people are underserved
The mortgage market faces a big challenge to serve current and future later life borrowers, whose needs are not being met by traditional lenders, such as the big banks, according to Leon Diamond, the CEO of LiveMore.
Diamond (pictured) pointed to figures from the Office for National Statistics (ONS) suggesting there are more than 25 million people in the UK over the age of 50, of which nine million are older than 70.
“These figures are only going to increase alongside our ageing population,” Diamond told Mortgage Introducer. “One of the greatest challenges for the mortgage market is addressing the millions of current and future later-life borrowers who are underserved by traditional lenders.
“While the mortgage market is starting to adapt to this with really exciting product and technical innovations, there is a gulf of knowledge around the increasingly flexible products now available to the over-50s. And some intermediaries and consumers still believe that the only option for lending in later life is equity release, or retirement interest-only (RIO) at a push.”
How is the later life lending market performing?
Nearly 29,000 new loans were advanced to older borrowers in Q1 2024, to the value of £4.3 billion, according to industry trade association UK Finance. Its data shows there were 28,840 new loans advanced to older borrowers - of these, 5,060 were lifetime mortgages, worth a total of £410 million. There were 284 retirement interest only mortgages advanced, with an overall value of £28 million. Residential later life loans represented 7.9% of all residential business, and BTL later life loans made up 22.5% of the BTL market.
Diamond said age shouldn’t be a factor when trying to find the best outcome for older borrowers. The focus, he urged, should be on a person’s financial circumstances such as their credit history, income - including during retirement - and loan affordability.
Older borrowers should not just be considered for equity release, but also standard interest-only products, standard capital and repayment mortgages as well as RIO and lifetime mortgages, Diamond added.
“It is, however, an increasingly complex market,” he reflected. “We have a responsibility to help fill the knowledge gap among brokers and consumers. A basic but really important challenge for our market and financial services in general, is the number of acronyms that are used alongside over-complicated financial promotions. We need to communicate more clearly and simply.”
Diamond said that a knock-on effect of the knowledge gap among some intermediaries is that they are unable to provide clients with truly holistic advice which, in his view, is especially important if the industry is to properly address Consumer Duty rules.
“Currently, the market is seeing a growing demand from older borrowers looking at remortgaging. We’re seeing the interest-only market continuing to grow,” he said. “Another plus is that rate volatility has calmed since the oscillations of recent months, and borrowers seem to have adjusted to higher rates being the new market normal.”
Read more: Brokers – is it time to talk about retirement?
Where will the later life lending market be in 12 months’ time?
Looking ahead, Diamond believes that in a year - as cost-of-living pressures persist - more borrowers in the 50+ market can be expected to move from capital and interest products to interest-only.
“The higher cost-of-living will, at the same time, help drive a bounce back in equity release, with those figures punching higher by the end of the year,” he predicted. “We can expect to see more players entering the later life market, alongside an increase in more flexible, hybrid products.”
The market will continue to face interest rate uncertainty, Diamond suggested, and while rates may come down a little, they would not reduce substantially.
“Longer-term fixes - such as 10-year fixed rates - may provide better opportunities as the long-term interest rate outlook starts to decline,” he reasoned. “I sincerely hope that in 12 months’ time we won’t have the deeply siloed market that we have today – with equity release on one side and mainstream mortgages on the other.”
