Later life lending has made missteps – but it's changing: executive

With consumer confidence returning, mortgage brokers could see a spike in demand for later life lending products, according to an industry executive – he’s urged them to be armed and ready with knowledge of what the market offers.

Paul Glynn (pictured), the CEO of later life lending platform Air, acknowledged the previous missteps of the later life lending market, and outlined where improvements are needed and are already starting to be made.

“It is fair to say that later life lending has not always had the best reputation within the industry,” Glynn observed. “Lifetime mortgage products were often tipped as somewhat of a lottery, with successful outcomes largely hinging on a customer’s point of entry into the advice journey and their choice of adviser. But the sector has come a long way, and it is a good job we have.”

Unique financial challenge

Glynn said he believed younger homeowners face ‘a unique financial challenge’ unlike their predecessors. Disproportionate rises in property prices would see them paying off mortgages into their retirement, which could see them rely on later life lending, going forward.

According to recent figures from the trade association UK Finance, there were 32,990 new loans advanced to older borrowers in Q2, down 8.34% year on year. The value of this lending was £5 billion, which was 17.5% lower, compared with the same quarter a year previously. There were 5,610 new lifetime mortgages advanced in Q2, down 16.9% year on year. The value of this lending was £470 million, which was a reduction of 6% compared with the same period last year.

But Glynn identified a renewed confidence among consumers, which could also boost his market in the immediate term.

“An increased volume of borrowers may decide now is the right time for them to engage with a later life lending product,” Glynn reasoned. “While advisers will have dealt with spikes in demand before, they could now see a greater influx of customers, combined with a backdrop of amplified regulatory scrutiny. Therefore, all advisers will need to be ready and able to recommend the best product for each client’s individual circumstance.”

How are retirement interest only mortgages performing?

Encouragingly, there were 326 retirement interest only mortgages advanced in Q2, up 23% year on year, according to UK Finance. The value of this lending was £30 million, which was 15.4% higher compared with a year before.

Glynn noted that later life lending was in a process of transformation. Following a Financial Conduct Authority review of later life mortgages last year, almost 400 misleading promotions were being revised or scrapped, he said. This would require brokers to think again about the advice they give.

“Intermediaries cannot simply fall back on the default products they have most routinely recommended,” he declared. “We know that individuals look to equity release for an array of reasons, so aiding advisers to deliver supportive and tailored guidance is a must. Whether they are releasing money for themselves or to gift to relatives, equity release cannot be a one size fits all approach.”

Read more: Equity Release Council issues guide for retrofit lifetime mortgages

“Overall, the diversifying needs of customers has led the industry to a fork in the road,” Glynn added. “Essentially, we need to take chance out of the equation, so clients know they’ll get the best service from any adviser they go to. The industry must collaborate to find innovative ways to serve the growing cohort carrying mortgage debt into retirement - only then will we see the industry’s full potential.”