UK Finance later life data “at odds with what’s happening on the ground,” say brokers – The Intermediary
This morning, UK Finance published its later life mortgage lending data for Q1 2024.
According to the findings, there were 28,840 new loans advanced to older borrowers in Q1, down 11.7% year-on-year.
The value of this lending was £4.3bn, down 8.5% compared with the same quarter a year previously.
There were 5,060 new lifetime mortgages advanced in Q1, down 30.1% year on year.
The value was £410m, down 31.7% compared with the same quarter a year previously.
In addition, there were 284 retirement interest-only mortgages advanced in Q1, up 1.4%.
The value of this lending was £28m, up 16.7% compared with the same quarter a year previously.
Newspage asked brokers for their views.
Reaction:
Ben Perks, managing director at Orchard Financial Advisers:
“Demand for Golden Ager mortgages is going through the roof at present. As a result, this data seems at odds with what’s happening on the ground.
“The older generation have seen extraordinary house price growth over the decades and many borrowers are now willing to use the equity within their home rather than sit on it.
“Fortunately, later life lending is not the beast it once was and it has become much more friendly.
“We still need more product innovation and it would be nice to see better repayment options for those who are able to make them.”
Simon Bridgland, broker and director at Release Freedom:
“Demand for later life mortgages has continued to surge, primarily for needs-based reasons such as clearing an existing mortgage and other debts, so this data made me double take.
“Many borrowers choose and are able to make interest payments each month to reduce the impact of compound interest.
“Innovation has come from the likes of Livemore and Legal & General, with both offering the flexibility people seek, however more work needs to be done regarding tie-in periods.
“Lock-in periods of 10-15 years are a little off-putting for many, especially those who want the ability to overpay in the future, which is common.
“The remortgage market for later life products has potential, as savvy users are reluctant to pay over the odds for the entire period.
“Regulators and compliance departments scrutinise cases being put forward, and in doing so help ensure people are receiving great advice, further evidenced by the low number of upheld complaints.”
Ranald Mitchell, director at Charwin Private Clients:
“We have seen a significant surge in later life lending enquiries so I’m slightly surprised by this data. Interestingly, many of the people approaching us didn’t initially plan on exploring equity release, but are legacy interest-only mortgage holders now approaching the maturity of their loans.
“As their mortgage terms come to an end, despite their original intentions to sell and downsize after surrendering their endowment (plus compensation) or investment plans, they find themselves seeking alternative solutions.
“Equity release mortgages are emerging as a compelling option for those who have kicked the can down the road for decades.
“The prospect of working into their 70s is impractical, short-term remortgaging is unaffordable, and pensions don’t adequately support Retirement Interest-Only options.
“With rising interest rates and diminished day-one lending, many homeowners are now enthusiastically considering equity release as a viable and attractive alternative to selling their homes.”
Justin Moy, managing director at EHF Mortgages:
“It’s peculiar to see the official figures saying there has been a contraction in demand for later life mortgages when we’re seeing demand for them go through the roof.
“We have seen a sharp increase in later life mortgage enquiries in 2024 to date, usually from borrowers with an existing mortgage due for repayment, other personal debts and even credit cards their children have racked due to the cost-of-living crisis and higher interest rates.
“Higher mortgage rates and increased home costs overall mean many fall at the affordability hurdle when they try to refinance.
“Hence, the appeal of equity release options, which allow those same people to borrow against high property prices without many financial checks.
“Interest servicing options have been trending, keeping the debt as small as possible just like a traditional interest-only mortgage, and the shorter ERC period such as those with More2Life still allow for a property downsizing in a few years’ time, without penalties.”
Warren Bleechmore, principal consultant at finova:
“There is evidence of product innovation, such as Standard Life’s Horizon Interest Reward product that offers a lifetime mortgage with the option to reduce the interest rate by making voluntary interest payments for that period.
“These are similar to retirement interest-only characteristics, and Legal & General’s hybrid lifetime mortgage, however they are not contractual payments.
“More innovation from lenders is needed to meet borrowers’ evolving needs, especially as demand for later-life products grows.
“Currently, a significant gap exists between RIO mortgages and lifetime mortgages.
“To address this, lenders should consider developing products with higher LTV ratios and hybrid options that blend the features of interest-only mortgages with traditional equity release.
“Additionally, products that allow flexible movement between contractual payment products and lifetime mortgages in response to life events could effectively bridge the existing gap and better serve borrowers’ needs.”
Stuart Powell, managing director at Advice Guru:
“Major trends in later life lending in 2024 have included:-returning customers.
“Over 30% of our clients in 2024 to date have been existing clients returning to borrow additional funds.
“Funds are being used to support family, improve homes and help with living costs.-affordability checks being introduced in equity release.
“Under Equity Release Council guidance, advisers should now check affordability for each customer.
“This has changed the landscape of lending as it opens the door to interest payments and new product innovations.
“Product innovation has been the key feature in the equity release market in 2024.
“Lenders offering interest rates up to 0.70% lower for customers prepared to pay the interest is just one example.
“Discounts for good EPC ratings and higher loan to values offered if clients pay the interest are innovations changing this market forever.”
Dan Osman, head of later life lending (Age 55+) at UK Moneyman:
“Q1 2024 has been one of demand and diversification.
“Pent-up demand for all later life options and a large increase in demand for older first-time buyers driven by escalating rents.
“Small deposits and equity buffers present a challenge but new long-term repayment solutions help.
“With lifetime mortgages, clients are open to regularly serviced interest, especially with lenders offering discounts, allied to products with shorter ERCs and greater flexibility.
“A lifetime mortgage is no longer a fit and forget solution with annual reviews and market comparisons the new normal seeing some clients reconsidering repayment mortgages in the future.
“It is time to challenge the remaining preconceptions around later life lending which will mean pressure on more mainstream lenders to review and justify age limits.
“Broker firms need to offer routes to standard mortgages, hybrids and lifetime products as clients seek that holistic advice.
“The days of the siloed lifetime mortgage broker are numbered.”
Iain Swatton, director at Exemplar Financial Services:
“The landscape of later life mortgage lending continues to evolve, reflecting changing client needs.
“Clients, anticipating a long-overdue base rate reduction, now prefer smaller drawdown payments for flexibility and control.
“However, many are adopting a ‘wait and see’ approach amid economic uncertainty.
“Enquiry levels for lifetime mortgages have risen, but clients are delaying their commitment due to ongoing economic uncertainty.
“Lenders continue to innovate to better serve client needs, with shorter ERC periods offering flexibility.
“Products like Payment Term Lifetime Mortgages and flexible drawdown options continue to meet the diverse needs, in particular the servicing of interest when affordability allows, increases the borrowing potential and mitigates the impact of compound interest, preserving property equity.”
