Helping older borrowers shore up their finances following COVID
Paul Adams is sales director at Pepper Money
Much has been made of the impact that COVID-19 will have on the finances of younger generations, who will ultimately be paying off the vast amount of government borrowing created by the pandemic for decades to come. This is undoubtedly true, and the economic fallout will leave its mark on the workforce and the mortgage market for many years, presenting new considerations and opportunities for advisers. But what about borrowers at the opposite end of their careers?
A recent study by equity release adviser Key, which surveyed people who intended to retire in 2020 and 2021, found that one in three people are retiring in debt this year with an average of £20,650 to pay off. In addition, the study showed that people expecting to retire this year are facing debts around a fifth higher than those who finished work last year.
The most recent Pepper Money Adverse Credit Study found that almost a quarter of all people aged 55 and over (24%) said the amount of outstanding debt they have has increased over the last year as a result of COVID-19.
So, it’s clear that the pandemic has negatively impacted the finances of many older people as well as those looking to take their first step onto the housing ladder, and this presents an opportunity for you to help.
Unlike younger borrowers, one of the advantages that older customers have is that they often have a significant amount of equity in their property, which opens up several options. Equity release is one route, of course, but it’s not suitable for everyone, and there are other ways to help sure up the finances of customers who are nearing retirement. Debt consolidation can sometimes be a good option for customers, for example.
At Pepper Money, we allow capital raising up to maximum loan-to-values (LTVs) for debt consolidation, with lending up to age 75, and this has proven an increasingly popular combination of criteria. Plus, to help borrowers who may be looking to clear existing debts whilst remaining in their current property, we now offer cashback options on some remortgages and have lowered our valuation fees on properties valued under £200,000.
Another option is downsizing, which can provide customers with a way of crystallising the increase in equity they have benefitted from in their property without increasing their borrowing.
The ability to borrow on an interest-only basis can prove an important tool in downsizing, particularly as we accept the sale of the main residence as repayment with no minimum equity requirement and plausible trading down strategy. Interest only options are available across our range up to 60% LTV.
The reality is that COVID-19 has impacted the finances of every age group and demographic in some way. The good news is that advisers have access to numerous solutions at their disposal to help their customers sure up their finances, irrespective of age.