CEO suggests intermediaries need to be ready for new market activity
With people generally living to a greater age than their parents or grandparents before them, later life lending has enjoyed a higher profile in recent years.
Lenders have responded to a new focus on living life to the full - for longer - with emerging new brands, fresh products and a wealth of on-trend marketing defining a specialist area of the mortgage industry that has huge potential.
Yet, like other parts of the industry, the market has seen a mixed picture in terms of activity this year, with lingering economic uncertainty clearly making some hesitant about taking the leap to commit to new financial arrangements.
According to UK Finance, in Q1 there were 28,840 new loans advanced to older borrowers, down 11.7% year on year. The value of this lending was £4.3 billion, which was down 8.5% compared with the same quarter a year previously.
There were 5,060 new lifetime mortgages advanced, down 30.1% on year. The value of this lending was £410 million, which was down 31.7% compared with the same quarter a year previously.
More encouragingly, there were 284 retirement interest only mortgages advanced, up 1.4% year on year. The value of this lending was £28 million, which was up 16.7% compared with the same quarter a year previously. Later Life loans in Q1 represented 7.9% of all residential loans and 22.5% of all BTL loans.
Equity Release Council (ERC) meanwhile reported too, that in Q1 4,216 new and returning customers made use of equity release products between January and March, up 4% from Q4 2023 (13,651), and returning customers drove a 6% quarterly increase in drawdown activity.
Some 56% of new customers opted for drawdown lifetime mortgages, the highest quarterly share since the Bank of England began to increase the base rate from 0.1% in Q4 2021, but new customer numbers dipped 11% on Q4 2023 and when coupled with the shift towards drawdown, resulted in total lending of £504 million for Q1, down 6% from £535 million in Q4 2023.
The council believes that, while consumer confidence is holding up well among people with existing plans, new customer numbers could be lower than last year because older homeowners are adopting a more cautious approach to borrowing as there are hopes of interest rate reductions in the near future.
Where will later life lending be in 12 months’ time?
As the economy hopefully settles and inflation falls, Paul Glynn (pictured), CEO of later life lending platform Air, is confident of an upturn in later life lending in the next year. He believes that brokers need to be across their consumer duty obligations and ready to embrace a rapidly changing market.
“In 12 months, we will see a far larger population of advisers actively engaged in the later life lending sector,” Glynn told Mortgage Introducer. “In turn, we will also see a spike in lenders offering a refreshed range of new-style products. That development might not come straight from the equity release side. But there is definitely a strong appetite to grow new products. One thing is for certain: the sector will be an exciting place to work over the next year.”
Glynn considers it really important that brokers know enough about the wider industry to signpost customers to later life lending products or new offerings, as appropriate.
“In some cases, you will need to support your customers by directing them to another B2B partner who can hand out the right advice,” he said. “If a broker wants to embrace this market – one that is rapidly changing – then they should consume all the education modules that are out there.”
The market is equipped with informative educational resources, including the London Institute of Banking and Finance’s modules on vulnerability and affordability which can help advisers keep product triage front and centre. Air has also heavily invested in its own training module for members.
“All of this is linked to the ERC’s competency framework and instructs brokers on using their tools to drive good customer outcomes,” he explained. “Making use of that offering will be really important. We need to foster a greater understanding for the new and emerging products that are on offer.”
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What makes the mortgage industry a rewarding career?
Glynn had a background in retirement planning and B2B relations in the retirement space, before settling into more specialist roles in the retirement finance sector. His career took him to Key Group, where he initially joined as a sales director for more2life before last year becoming CEO of Air Group.
“This is a really rewarding industry, particularly in the later life sector,” he shared. “In the traditional sense, later life lending was about creating an opportunity for a homeowner who had paid off their mortgage. You could help these people get some real peace of mind – they could benefit from tailored product designs, and every decision they made was informed by market-leading advice.
“It’s a much more dynamic space now. In the 21st century, you are seeing people in their 50s who are still shouldering significant mortgage debts, sometimes up to an LTV of 30%. They are still making payments, which are only becoming more burdensome each month. If you can put a customer in front of a truly dedicated adviser, then that adviser will move heaven and earth to locate financial options that go beyond the obvious and help reduce a customer’s overall costs.”
As Glynn pointed out, this is complex work and often good brokers do not get the credit they deserve because a lot of their work doesn’t always result in a sale. “The value of advice is immeasurable, ” he concluded.
