As it stands 69% of the UK’s housing equity is owned by over-55 year olds, The Intermediary Mortgage Lenders report, ‘developments in later life lending to an ageing population’, has found.
The number of over-65 homeowners has risen 52% in the last 20 years while the over-65 population in general has risen just 28%, with accelerated growth on the horizon.
In response, IMLA called on UK financial advisers to break down the silos between pension and mortgage advice, and offer a more holistic service to keep up with the pace of product innovation.
Kate Davies (pictured), executive director at IMLA, 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.”
Over 40,000 interest-only loans held by over-65s are due to mature each year between 2017 and 2032, with many of these borrowers requiring extended mortgage terms to stay in their homes through retirement.
As such, it is little surprise that lifetime mortgage lending increased by 29% annually since 2014 as the later life lending industry has developed a raft of innovative capital repayment, retirement interest-only (RIO) and lifetime lending options to address the growing demand.
These new products, with improved features such as partial repayments and drawdown facilities, are leading to a ‘softening’ of the traditional divide between later life and mainstream financial products.
As the sector grows, the report suggested that financial advice needs to evolve alongside this product innovation.
IMLA noted that financial advice has traditionally been found in silos and much more work needs to be done by guidance and advice on signposting retirees to better support decision-making.
Keith Barber, director of business development, Family Building Society, said: “As your home is probably the major asset of your life, it needn’t be passive.
“There are impediments to moving/downsizing (e.g. stamp duty, lack of attractive alternatives) , there are sensible ways in which it can be used to benefit family members. The FBS has for many years been lending in later life, unlike many who just talk about it.
“There is not one later life lending market – there are a lot of individuals with a wide range of needs that warrant consideration in product design and underwriting.
“There are many reasons to borrow into later life, from not being able to pay off your interest only mortgage through needing a top up to your pensions to tax planning to maximise the inheritance of your children / grand-children or helping them with getting the home that they want.
“Borrowing can be simply another tool for the financial savvy and not necessarily for financial need, analysis tells us.
“And that there is a definite need to pass the wealth down generations so the holistic view is not just about the older borrowers cohort, it is also encompasses two or three generations, i.e. family.”