Expanding options for aging borrowers

This article was produced in partnership with Family Building Society

Over the past decade the later life lending space has expanded enormously, smashing the confines of TV ads touting equity release as the only option and bringing to market increasingly flexible options and a wide range of products. And there’s no end in sight: its significant evolution is something brokers should keep an eye on heading into 2025, said Family Building Society’s Paul Roberts (pictured left).

“We’re an aging population, so this market will only grow,” added Roberts, senior account director. “As more products come online, new ideas are floated, and consumers expect more choice, it’s all about education. The tools to serve this segment are all there — but to find them, you’ve got to be looking.”

Re-routing away from Equity Release Row

Going back those 10 years or so, later life lending was a very constrained market. There weren’t many people in the industry specifically advising on it and when people got to a certain age, typically their 50s or 60s, and they took a walk down the one-way street of Equity Release. While that option can work for some, “it doesn’t have to be that way,” said Neil Cadwallader (pictured right), field business development manager.

The accepted ‘norm’ saw people spend their whole lives paying off their mortgages, to end up asset rich and cash poor. But there are so many alternative avenues out there that many people — including some later life lending brokers — aren’t aware of.

“I promote the educational piece,” he continued, noting that regulatory changes in particular have opened the floodgates in terms of choice, from later-life specific products to traditional ones outside the specialist lens.

“Lenders like us offer flexible options, and that’s the difference.”

For older borrowers looking to gift money to family members, invest in a second home, or do some home improvements in their current property, traditional mortgage options are far more attractive than equity release. At Family Building Society, this trend is bearing out. There’s been a marked uptick in later life borrowers staying with standard mortgage products and there are a few reasons for that.

Take the differences between a Retirement Interest Only (RIO) mortgage and a typical Interest Only (IO) mortgage. One of the big differences is that with the Retirement Interest-Only mortgage, there’s often a “death test” whereby affordability is calculated on one spouse’s income and not both. With a standard Interest-Only mortgage on the other hand, it’s a more generous assessment: there can be up to four applicants/incomes considered. A standard product also allows borrowers to stick with what they’re used to, i.e. a two- or five-year fixed rate.

Family Building Society also offers a similarly generous loan-to-value policy. Whether the borrower is 25 or 85, the lender can go up to 80% LTV — a huge difference in comparison to what an equity release product considers.

Ultimately, Family Building Society is primed to help borrowers utilize their property wealth in parallel with earned income later in life, using all assets held in the client’s background. For example, the lender can create an income based on things like pension pots, investments, and buy to let property income. There’s also no credit scoring, with the approach being to understand each case based on its individual merits.

“It’s something we’re very good at and the standard products we offer can also strategically serve as a bridge to get them from High Street to a later life lending product when the time is right,” Roberts explained, and Cadwallader added that this “steppingstone” role shouldn’t be underestimated.

“Using us while on the early end of the later life spectrum means the borrower isn’t locking into one interest rate for the rest of their lives with interest building up on that,” he said. “They can still turn to equity release down the line, but delaying it has a major impact on what they’ll be able to pass on to their loved ones.”

At the end of the day, for Cadwallader, it’s the ability to help a broker and their client find another way when they think there’s no other way. To help when no other lender can.

“We do it differently and it’s like a breath of fresh air, the impact we have,” he noted. “We get in front of brokers that would go down a certain avenue and show them a different way.”

Family Building Society ‘a flagship’ for later life lending

Family Building Society is a stalwart in the later life lending space, boasting a sterling reputation and many years of experience. It saw the writing on the wall when it came to the potential in the aging population and set down roots. Over 50% of what Family Building Society does falls under later life lending, and there’s a growth in applications year-over-year that’s expected to continue.

“We’re the flagship for this kind of lending, the biggest of the small lenders doing this work, and we’re making a difference,” Roberts said. “But half the battle is letting brokers know we’re here.”

Roberts recalls a recent trip to a broker event in Bolton where whenever he was given the opportunity, asked brokers if they realised clients could use earned income beyond 70, or a mortgage beyond 80 — even up to 95 years of age. Many were amazed. Being able to help someone stay where they raised their family, for example, or simply in the home they love so much, is a powerful thing. And that’s why Roberts is “one of nine Family Building Society BDMs running up and down England and Wales spreading the word,” he said with a laugh.

There may still be some mystery around later life lending, but there’s a recognition of the need for high-quality advice and innovative products for older adults. Between Family Building Society’s Education Hub and consumers themselves becoming more educated and changing the conversation with brokers, what the lender has to offer is starting to cut through.

“Brokers are realising it’s not a one-stop-shop when it comes to reaching a client’s aim,” Cadwallader summed up. “BDMs really are the font of all knowledge in terms of what we can do, so talk to us. There’s no such thing as a silly question, or a matter that’s too small. The future of later life lending looks promising, so keep asking questions, utilise all the tools at your disposal, and keep expanding your knowledge.”