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Mortgages into later life are opening up a new wave of lending

22nd October 2019

It’s clear that the UK’s population is ageing and mortgage lenders are adapting positively to cater for this growing demographic.

However, the stereotype of older borrowers settling down with knitting and a newspaper seem long gone, as many look to invest in buy to let to help boost retirement income, help their children onto the housing ladder or they plan to ‘right size’ their property to satisfy retirement goals.

Brokers are seeing a new wave of lending requests from older borrowers and lenders are experiencing an increase in lending to this growing audience - the ONS estimates that by 2050, one in four people in the UK will be aged 65 years or over.

This has resulted in lenders taking a more pro-active view of these borrowers as they are now living healthier, longer lives and increasing their economic activity to a much older age. Indeed, recent data from The Financial Conduct Authority (FCA) found that 39% of borrowers who took out a mortgage in 2017 will be aged over 65 when their mortgage matures.

Lenders are already enhancing their products to meet the demand from this more ambitious breed of retiree. The product development and criteria updates from lenders are increasingly able to cater for the demands of this growing market as the population continues to age.

For example at the Leek we’ve recently improved our criteria to consider income from self-invested personal pensions (SIPPs), in a move that responds to the prevailing and future market. Also, where a borrower’s retirement is over 10 years away, and we have evidence that a pension is in place, then we will use the borrower’s current income for affordability purposes rather than the projected pension income.

Enhancements such as these provide further opportunities for brokers when it comes to assessing income and affordability for older borrowers. Furthermore at Leek United we have no upper age limits at the outset or at end of term and look at each application individually.

Building societies in particular are well placed to help brokers with mortgage applications from those looking to borrow into retirement. As an industry we have an older demographic, so we have many years’ experience in providing products for them and we understand this audience. Service is also key - we’re always looking for the right outcome for the customer and look at every mortgage application individually with due care and consideration.

Alongside income many older borrowers have also accumulated wealth in their property and savings. With the sharp rise in property value in recent years many have assets that provide good security for lending decisions to be made when considered alongside their ongoing income.

In recent years, lenders have responded to the need for mortgage product evolution in this market and brokers have more options for their ageing customers than ever before. It looks like lending into retirement will continue to be a major part of a lender’s mortgage portfolio for years to come and brokers can also increase their business in this sector too as their clients seek a more exciting and active retirement.

 

Notes:

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/livinglongerandoldagedependencywhatdoesthefuturehold/2019-06-24

https://www.fca.org.uk/publication/corporate/sector-views-january-2019.pdf#retail-lending

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