The recent IMLA report ‘Bridging the gap: developments in later life lending to an ageing population’ suggests that the number of over-65 homeowners has increased by a half in the last 20 years, from 4 million to 6 million. Never have older borrowers had so much power over the property market, and whilst this market is thriving, it is also influenced by several different factors, including increased regulation as consumers increasingly buying for the first time in their late 30s or 40s.
IMLA is rightly highlighting the need for improved and holistic financial advice in later life, as latest figures show that an estimated 1.42 million borrowers aged 35 – 64 are not on course to repay their mortgage before entering retirement given the current term of their loan. The best outcome is only achieved by comprehensive and readily available financial advice, and not enough older borrowers appear to receive as much.
Whilst lenders are updating their proposition to cater to this growing sector, we need to ensure we have the appropriate financial advice to go alongside it, particularly given how regulation affects this type of borrower. The report discusses the introduction of the Mortgage Market Review and how this has impacted later life lending, with more borrowers finding it difficult to borrow on an interest only basis, and instead opting for longer term capital repayment mortgages.
There are hopes that a new single financial guidance and claims body opening at the end of this year (combining the Money Advice Service, The Pensions Advisory Service and Pension Wise) will pave the way for improved financial expertise in this area, based on the Financial Advice Market Review of 2016. With mortgage debt held by over-65s projected to increase by 95% by 2030 according to figures by the Equity Release Council, there is certainly a need to look forward rather than just at the progress already made.
I mentioned that never before have had older borrowers had so much power over the property market, but it must be emphasised that the later life lending market has also never been so diverse. This is a complex and unique sector and it is important that all parts of the mortgage industry ensure that older borrowers are not putting themselves into an unstable financial situation.
One recommendation in the report is for the development of more tools for retirees to help them understand their options better, and it would be encouraging to see this recommendation followed through, especially where consumers are helped in the interpretation of these tools by professional financial advisers.
The amount of homeowners aged 65 and over will continue to gain share in the market from the third that they currently own; and intermediaries, brokers, regulators and lenders alike all have a part to play in ensuring that the steady steps already made can be the catalyst for even better times ahead for later life lending.