How is the later life lending market changing?

With £4.3 bn of new loans advanced to older borrowers in Q1 2024, according to the trade association UK Finance, later life lending is undoubtedly a vibrant sector in the UK.

While this may have been down 8.5% on a year before  – where, in common with other areas of the mortgage market, cautious borrowers perhaps held off from over committing themselves in an unsettled economy – later life lending is holding its own. And, it isn’t just about equity release any more.

As broker Mike Jones (pictured), a later life specialist from Mewstone Mortgage Advice, pointed out to Mortgage Introducer, there’s a broader range of flexible products for the 50 to 90 plus age group, even compared with five years ago.

“I’m really passionate about that,” Jones explained. “For me, it’s always been about the holistic experience rather than a product focus, but the industry and market has been slow to catch up. Thankfully that is now happening, with more and more flexible and hybrid products coming on the market. We later life lending professionals need to celebrate that – it’s great for us as we have more options for clients.”

The Plymouth-based broker believes general, high street mortgage brokers won’t necessarily be aware of the flexibility of mortgages on the market - for example, that lenders will consider conventional, standard mortgages and RIO mortgages for older age-groups.

“Life isn’t just a straight line,” he said. “You get ups and downs, and lending products need to flex with that. For example, it isn’t unusual for borrowers in their 50s or so to suffer a bereavement and find themselves with inheritance money which means they won’t need to borrow for the rest of their life. The more traditional approach of considering equity release first could have them locked into a lifetime commitment that could potentially be unsuitable for them.”

How many new later life loans have been advanced this year?

UK Finance’s data shows there were 28,840 new loans advanced to older borrowers in Q1. Of these, 5,060 were lifetime mortgages, worth a total £410 million. There were 284 retirement interest only mortgages advanced, with an overall value of £28 million. Residential later life loans represent 7.9% of all residential business, and BTL later life loans made up 22.5% of the BTL market.

Jones credits technology with playing a key role in market searches feeling less fragmented, and supporting brokers to fulfil their Consumer Duty obligations.

“Finding the right product has been quite a siloed experience for brokers working in this age group,” he noted. “Normally, we have to do three separate searches: one for lifetime mortgages, then RIO, and then a conventional mortgage search. Now they’re becoming more joined up, which is so much easier and will save us a lot of time. 

“All major stakeholders in the market are making significant changes to technology to address the needs for a holistic approach to later life lending. The industry focus is very much on using technology to support the customer solution rather than working backwards from a product and getting it to fit the customer.

"Lenders are helping us so we can get the correct advice for client. The technology behind the LiveMore Mortgage Matcher, for example, was built from the ground-up purely to help intermediaries find all possible options for their full range of product types for the 50 to 90 plus age-groups.”

Read more: The later life lending exec who doesn’t see age as a barrier to borrowing

What impact has Consumer Duty had on later life lending?

Jones, who came from a retail banking background and has been in the business for about a decade, indicated that a year on from its introduction, Consumer Duty has embedded well into broker life. He hasn’t noticed a difference in his working day, apart from the requirement to evidence that he follows the rules.

He explained that trust is the biggest barrier to finding a solution for an older client - getting them to trust a broker enough so that they disclose financial and personal information.

“If a client trusts you enough and takes the time to share their pension information with you, that can unlock greater borrowing capacity and a whole new range of products,” he said. “Earning that trust is so important so that clients answer the critical questions. It can have a huge impact on the overall outcome.”