A rapid increase of ageing homeowners has resulted in an influx of later life lending causing a strain on the current model of financial advice, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).
Homeowners are now ageing at a faster rate than the UK population and developments in later life lending has put pressure on the financial market sector, according to IMLA.
To summarise IMLA’s report findings:
- The number of over 65s homeowners has risen 52% in the last 20 years which is nearly six times the UK average and almost twice the growth rate of the overall 65+ population
- A later life lending boom has put pressure on financial advisers to create a new generation of mortgage products to meet the needs of a growing cohort of mature borrowers.
- An increase in post-retirement lending in later life means guidance and financial advice must be better consolidated to support new decision-making on mortgage lending
In order to serve a growing population of older homeowners, a new generation of mortgage products has been developed, according to the report: ‘Developments in later life lending to an ageing population’.
The IMLA are now asking UK financial advisers to break down the silos between pension and mortgage advice and offer a more inclusive service to keep up with new product innovation.
The report reveals that the over 65s population, in general, has risen 28% but over 65s homeowners has risen a staggering 53% in the last 20 years which is yet to increase even more in the near future. By way of comparison, the UK population has increased by 28% over the same period, while overall homeowner population has only risen 9%.
This demographic trend has resulted in homeowners over the age of 55 now holding an astounding 69% of the UK housing collectively, meaning retiree’s facing mortgage debt is set to double by 2030.
Furthermore, the report highlights a concern whereby the over 65s homeowners have over 40,000 interest-only mortgages which are set to mature each year between 2017 and 2032, which means these borrowers will need to extend their mortgages in order that they can remain living in their homes throughout the rest of their retirement.
It is no surprise, therefore, that lifetime mortgage lending has increased by 29% every year since 2014 as the mortgage industry has created numerous advanced products to address this growing demand.
The new innovative mortgage products have vastly improved features which include partial repayments and drawdown facilities which differentiate themselves from the mainstream financial products in the market currently.
As the later life lending sector grows, the report does suggest that financial advice needs to change alongside this product innovation and there is much more work to be done with regards to guidance and advice which better supports retirees in decision-making.
Kate Davies, Executive Director at IMLA commented. She said: “Changing demographics and socioeconomic pressures mean it’s likely that later life lending will become a significant growth area for the mortgage industry. And, as more retirees seek to stay in their homes or unlock equity, product innovation will drive lending forward and make it a bigger component of financial planning in retirement.
Our report finds that many retirees’ homes are worth as much or more than their pensions, and both elements need to be considered as part of a wider retirement plan. This creates challenges for those providing financial advice, many of whom will be expert in one area – pensions, investments or mortgages – but who will not necessarily have the qualifications or permissions required to advise across the spectrum.
IMLA welcomes recent reviews of later life lending published by the Equity Release Council and Building Societies Association, as well as the latest report published by the Financial Conduct Authority. Much research has been done which identifies the problem facing older borrowers – the challenge now is in pulling together the various strands to make real progress. We look forward to playing a full role in that.”
As a conveyancer, have you seen an influx of older buyers coming through? Has it affected the transaction process?