It's a matter for our politicians too…
Nearly 29,000 new loans were advanced to older borrowers in Q1, to the value of an impressive £4.3 billion, suggesting that many are proactively addressing how they fund their retirement years and ensuring it happens.
But the figures from industry trade association UK Finance show that new loans for over 55s were also down 11.7% on the year previously, and the 5,060 lifetime mortgages advanced in the first quarter were down 30.1%, compared to the same time in 2023.
The value of this lending was £410 million, which was down 31.7% compared with the same quarter a year previously. Of course, this could be reflective of an unsettled economy, but it may also be indicative of a new trend. Do more people need to be encouraged to think about their retirement planning?
Sanjay Gadhia (pictured), head of sales at later life lender Standard Life Home Finance, certainly thinks so – he’s urging a greater focus on financial planning for our senior years.
“Property wealth plays a significant role in retirement planning, but many people don’t start thinking about it early enough,” Gadhia told Mortgage Introducer. “Encouraging earlier planning could make a big difference. One of the key challenges politicians should address is how to help people plan for retirement earlier.”
What is the perception of later life lending?
There were 284 retirement interest only mortgages advanced in Q1, worth £28 million. Yet Gadhia noted that later life lending is still seen by some as “a product of last resort”, despite how the sector is changing.
“The market has evolved and now has products which support a wider demographic,” he said. “In the next 12 months, I’d expect later life lending solutions being considered alongside more mainstream product options. With features like an early repayment charge period of only eight years and downsizing protection from day one, modern lifetime mortgages offer clients flexibility should their circumstances change in the future. I believe we’ll see more widespread adoption and understanding of these benefits.”
Knowledge is power, in Gadhia’s view – and continued education is vital, not least for intermediaries, whom he suggested need to keep properly across developments in the market.
“My top tip for brokers is to stay informed about the innovative solutions being developed by lenders in the later life lending industry,” he urged. “For instance, our Horizon Interest Reward plan offers customers a discounted rate for the duration of their lifetime mortgage if they commit to servicing some or all of their interest for up to 15 years. Keeping up with these innovations can help brokers offer the best options to their clients.
“We allow customers to make ad hoc or voluntary payments of up to 10% of the initial loan across our lifetime mortgage and interest reward plans. Making even small monthly repayments can help a client mitigate the impact of compound interest. Staying informed and continually learning can make a significant difference in the long run.”
Read more: How many UK retirees are still paying off mortgages?
How important are brokers to the later life lending market?
Gadia described lenders relationship with brokers as “absolutely crucial”.
“Collaborating with them ensures that we can keep providing customer-centric solutions that truly meet the needs of our clientele,” he said. “The market continues to meet customer needs, whether it’s paying off an existing mortgage, creating a financial gift to a relative, or funding home improvements.
“While rates in the later life market have now broadly normalised, we don’t expect them to return to pre-2022 levels any time soon. Change is a constant, and, as a market, we must keep evolving.”
