Drop in numbers "indicative of our still-turbulent market"
Mortgage lending to borrowers aged 55 and above fell considerably in the fourth quarter of 2023, UK Finance’s quarterly report on later life mortgage lending has shown.
During the last three months of 2023, a total of 29,060 new loans were advanced to older borrowers, marking a 37.1% decrease from the previous year.
The total value of these loans amounted to £4.1 billion, representing a 42.4% fall compared to the same quarter in the prior year.
According to the UK Finance quarterly insight, new lifetime mortgages saw a 40.1% year-on-year decline, with 6,710 loans advanced and a total value of £520 million. This figure is down 57.4% from the same period a year earlier.
Retirement interest-only mortgages also experienced a downturn, with only 255 new loans advanced, a 43.3% decrease year on year. The value of these loans came to £26 million, down 38.1% from the previous year's quarter.
Residential later life loans in Q4 accounted for 7.38% of all residential loans, while buy-to-let later life loans represented 21.98% of all BTL loans.
“The mortgage market continues to be particularly challenging for borrowers above the age of 55,” commented Arjan Verbeek, chief executive of digital mortgage lender Perenna. “The decline in mortgage lending to this demographic demonstrates that the mortgage market is fundamentally ageist.
“Concerns about mortgage affordability are particularly prevalent among later life borrowers, who often face end-of-term age-related restrictions from lenders when trying to remortgage or secure a new mortgage. The current market, dominated by short-term fixed teaser rates, does little to support this demographic.”
Simon Webb, managing director of capital markets and finance at later life lender LiveMore, said the sharp decrease in loans to older borrowers despite an ageing population and an increase of later life mortgage products available is “indicative of our still-turbulent market.”
“When we see these types of figures it rings alarm bells about the potential increasing number of mortgage prisoners in the UK,” Webb said. “Interest-only mortgages can help mortgage prisoners who can’t meet affordability criteria as well as those with interest-only mortgages due to mature but who have no repayment plan in place. Without suitable products, these two groups of customers would otherwise have to sell up or pay very high interest rates.”
Verbeek, however, said that homeowners over the age of 55 should not be inhibited by concerns about mortgage affordability or be forced to pursue less desirable alternatives, such as equity release or postponing retirement.
“They should have solutions available to live the lives they desire and deserve,” Verbeek said. “Retirement interest-only mortgages can help to provide flexibility and certainty for over-55s, but to provide a real solution to this problem, structural change within the market is needed.”
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