Sarah Davidson reports on the efforts being made across the industry to improve borrowing options for the silver-haired generation
Regulation
In the past week both Nationwide and Halifax have raised their maximum age to 85 while building societies have been gradually increasing their maximum ages across the piece over the past six months. Meanwhile the Financial Conduct Authority recently published a discussion paper asking the industry for its views on providing appropriate financial services to an ageing population earlier this year and the consultation has just closed. The regulator is now conducting further market research with plans to publish recommendations in 2017. A spokesman from the regulator says: “As older consumers represent a growing proportion of the UK population, it is now more important than ever that we deepen our understanding about how markets work for older consumers, so we can make recommendations that improve outcomes for these cohorts. We are keen to facilitate the debate about what older people need from financial services providers.”
In this case the regulator has put its money where its mouth is: last month it reversed existing regulation for lifetime mortgages where a borrower made monthly interest payments, meaning that providers can now waive the affordability rules that used to apply. The waiver applies only to lifetime mortgages where the product morphs from effectively an interest-only mortgage into a traditional lifetime mortgage where the interest rolls up. It might sound niche, but the mortgage industry welcomed the change with open arms because of the potential it offers as part of a solution for older borrowers on interest-only deals. Santander has already said publicly it plans to launch a lifetime mortgage and it is believed that Halifax – the other interest-only behemoth – is considering the question. It is believed they are not the only ones.
Meanwhile in the lifetime mortgage sector, providers are beginning to see the potential and act. Hodge Lifetime is currently piloting its 55+ Mortgage which is an interest-only mortgage based on affordability for clients over the age of 55 years, up to a maximum of 60% loan-to-value. The client can select a payment term to coincide with their selected repayment strategy which can be: sale of property (downsizing), sale of another investment property, sale of investments or share portfolio and proceeds of a maturing endowment policy.
“Harpenden Building Society also seems to have also identified that it can use the regulation effectively to offer a similar scheme to Hodge,” reveals Christine Newell, mortgages technical director at Paradigm Mortgage Services. “The smaller building societies seem to have got a better understanding of the older generation profile and the likes of Marsden, Darlington and National Counties will all consider lending to clients up to the age of 85 years old.
“New entrant The Mortgage Lender – headed up by Trevor Pothecary and due to launch imminently – will also be looking closely at this client set and starting off with a maximum age of 80 years.”
OneFamily Lifetime Mortgages has also launched in the past month and is headed up by Georgina Smith, formerly at Stonehaven and a true advocate of innovation. Its products include a variable rate repayment/roll up lifetime mortgage which has the potential to shift the market.
What is lacking currently is co-ordinated and widescale action from the large mainstream lenders which represent over 80% of the mortgage market.
“We still need to have some movement on this from the big mainstream lenders who in general will only consider lending to the age of 70 or 75 years old giving very little scope for flexibility for people retiring at the state pension age of around 67,” explains Newell.
It is becoming increasingly important that lenders move on this agrees Stuart Wilson, managing partner at the Later Life Academy. “The average debt for the over 60s is approximately £18,000 but at the moment much of the retirement ‘borrowing’ is on personal loans or credit cards and this may not be the most cost-effective and suitable outcome,” he warns.
