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Smarter lending solutions to help older borrowers

12th November 2019

Recent figures published by the Office of National Statistics (ONS) show that in 50 years’ time there is projected to be an additional 8.2 million people aged 65 years and over in the UK – a population roughly the size of present-day London.*

Their data also shows that life expectancy has remained the same in recent years at 79.2 years for males and 82.9 years for females.

However, the ONS also report that the size of the UK population aged 90 years and over continues to grow. In 2018, the total number of people aged 90 years and over increased by 0.7%, from 579,776 in 2017 to 584,024. This compares with increases of 1.5% and 2.7% in the two preceding years.**

Lenders and brokers are well aware of the rise in opportunities lending to older borrowers in recent years which is reflecting the changing population demographics in the UK.

To continue to provide suitable mortgages for these people, lenders need to continue to be responsive and agile when it comes to developing new products and deliver them swiftly to market for intermediaries to benefit from enquiries when a client wants to borrow into retirement.

To help brokers spot these cases knowing they have product options with lenders to help older customers, lenders need to be innovative in their approach, be flexible when it comes to assessing affordability and develop criteria which caters for the wide variety of uses older borrowers want to use the lending for. They could be buying a new home but retaining their existing property as a buy to let to generate income in retirement, moving to a home that is the ‘right size’ for their future, or re-mortgaging to get their finances and home in order for the years ahead.

A recent case that highlights one of these situations, where Leek United were able to look at underwriting the case individually for a positive customer outcome, was introduced to us by a broker who knew our criteria when it comes to helping older applicants.

The case was a re-mortgage for a couple looking to repay their existing lender, consolidate some debt and make home improvements that would increase the value of their home.

The applicants will be aged 85 (applicant 1) & 74 (applicant 2) at the end of the term, and they are already retired and in receipt of guaranteed pension income.

Affordability was carried out jointly, but as applicant 1 would be over the age of 83 at end of term, we checked affordability individually to ensure applicant 2 could make mortgage repayments on their own if needed.

In calculating individual affordability we took into account the pensions applicant 2 would be entitled to, and factored in that the household expenditure would reduce with just one occupier in the property.

By looking at the case closely with a flexible approach, Leek United were able to offer a solution and were happy to lend in this scenario.

It’s vital that to serve this sector of the market brokers have confidence in lenders to be able to find this type of solution.

An adaptable approach and more discerning underwriting in changing market conditions are essential as we move forward with an ageing population. 

Brokers are increasingly aware that lenders need to have knowledgeable staff who can consider this type of application and look for more versatile solutions as this part of the market looks set to continue growing.

 

References:

*https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/august2019

**https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/bulletins/estimatesoftheveryoldincludingcentenarians/2002to2018

Image By: Ruslan Huzau/Shutterstock.com 

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