Later life lending: confidence is building

Optimism follows the latest interest rate cut

Written in line with our editorial policy.

There is growing confidence in the later life lending market, according to the CEO of a leading UK firm specialising in this market.

Writing for Mortgage Solutions, WIll Hale (CEO of later life lending specialists, Key) says that: “Later life lending advisers are reporting a rise in enquiries, giving real reasons for optimism that the market is recovering.“ 

This is in the context of higher interest rates in recent years which has had an effect on borrowing, including in the later life lending market. The Bank of England’s first rate cut in more than four years in August may be seen by some consumers as prompt to look again at borrowing.

Why are so many people near or at retirement looking to borrow money? 

Will Hale also pointed out why later life lending that involves making the most of property wealth continues to have a place: “Customers increasingly struggle with saving into a pension while buying a house and paying a mortgage. That means many in later life have limited retirement savings and significant mortgage debt. 

“This conundrum is not straightforward to solve but viewing the home as an asset to help fund later life has to be part of the answer.”

In a recent Mortgage Solutions podcast, Edward Payne, director of Clifton Mortgages, pointed out that another driver for a growing later life lending market is the ageing population. Payne acknowledged that there was a “broader range of products being recommended now”, which was partially due to “necessity” but “customer need is driving a lot of enquiries”.

“Sometimes it’s down to people needing to deal with issues arising from coming to the end of an interest-only mortgage, sometimes clients I see are trying to do tax planning, inheritance planning or care planning and a lot of the time clients I see are trying to raise money for lifestyle purposes,” he said.

On the other hand, according to Michael Craig, managing director at Brilliant Solutions, more people are now funding deposits for their children or grandchildren. This includes helping them achieve more competitive interest rates with a lower loan-to-value (LTV).

Later life lending products such as equity release and retirement interest-only mortgages are among the ways that parents and grandparents can help younger family members onto the property ladder.

Of course, not everyone has a property against which they can borrow money such as with equity release. It would seem that more people are now leaving it later to buy a home.

Between 2018 and 2022, the number of first-time buyers in their 50s increased by 29%, according to Financial Conduct Authority (FCA) data. In fact, over 60% of new mortgage borrowing now extends beyond the borrower’s 65th birthday, as reported by UK Finance.

Innovation in later life lending

Societal changes and the evolving needs of older homeowners have led to greater innovation amongst lenders when developing their products. The rise in interest-only lifetime mortgages is a good example of how lenders are adapting. 

Unlike traditional equity release products, interest-only plans allow clients to service the interest on their loan. This means that more of their property equity will be available as an inheritance when the house is sold to repay the loan.

We will no doubt see further innovation to meet the growing needs of older customers. By delivering tailored solutions and offering clear, professional advice, lenders and advisers can help consumers get the most from their finances.

Speak to a specialist

Options such as equity release and retirement interest-only mortgages (RIOs) allow you to tap into the value of your home while continuing to live there. If you wish to explore how either of these later life lending products could help you, make sure you speak to our selected advisers.

They will take the time to explain everything to you about the different types of plans, compare equity release rates and make sure you understand how an equity release plan will reduce the value of your estate.

To explore equity release or retirement interest-only mortgages, contact our friendly team at 0808 178 3055 or request a call back.

About Richard Groom. A writer with 20+ years’ experience across several sectors including financial services, Richard has a passion for writing clear and simple content on even the most complex of subjects. In his spare time, Richard loves exploring the hills and mountains of the UK on long walks with his faithful cocker spaniel. Follow Richard on LinkedIn