Craig Calder is director of intermediaries at Barclays Mortgages
We talk a lot in the industry about how the mortgage market has evolved though tech advances, product innovation and criteria enhancements (to name just a few factors) but we sometimes neglect to highlight that the advice process has also had to evolve alongside this.
The financial burdens and requirements of all age ranges are coming under increased scrutiny in the wake of political and economic uncertainty.
Changing social demographics and attitudes to borrowing are also placing an increased emphasis on the need for a more holistic advice process across all areas of financial services.
When you add increased regulatory and market complexity into the mix, its little wonder that consumers, lenders and service providers are more reliant than ever on intermediary channels to provide both support and volume for their offerings.
One of the major challenges facing the intermediary market is later life financial management. Now you might think this is beyond the realms of the average mortgage adviser, but this area leads to repercussions along the advice chain.
Average life expectancy in the UK is now 87 years, yet the average adult expects to retire at 65 and live to just 82.
This data was included in research from Scottish Widows which also found that the majority (80%) of advisers said their clients underestimate how much they need to save in retirement.
In addition, more than half (56%) often see clients underestimating how long they’ll live for.
As a result, advisers said they are regularly having conversations with their clients to discuss the potential for running out of assets and agree on plans to mitigate this.
This data highlights the challenges facing the intermediary market. And how important good quality professional advice is, in terms of offering access to the right levels of information and range of options throughout a borrower’s lifecycle – as circumstances, both financial and personal, will continue to change. Let’s start from the beginning.
First-time buyers will always be the bedrock of the mortgage market and the foundation on which many advisory processes are built. Thankfully, first-time buyer demand is rising.
The latest figures released by UK Finance showed that there was strong growth in first-time buyer numbers over the summer – with year-on-year figures up 5.8%.
According to the data, 32,640 new first-time buyer mortgages and 32,710 homemover mortgages completed in July 2019 yearly rises of 5.8% and 1.4% respectively.
Of course, the outlook is more challenging in certain areas of the UK, but first-time buyer growth is being experienced across many regional markets where affordability is less of a burden and is supported by some highly competitive mortgage rates, even at the higher end of the LTV scale.
The increased support of family members in helping first-time buyers onto the property ladder is also evident, a trend which is putting further weight onto the shoulders of parents which may also be impacting their financial well-being and potential retirement plans.
The latest ‘hotel of Mum and Dad’ report from MoneySuperMarket revealed that a quarter of the nation’s millennials and young professionals are moving back home to save money for a deposit.
It suggested that children who move back home to save money cost their parents over £1,600 during their stay, a year-on-year increase of 83%.
The findings showed that returning children are staying with their parents for longer at an average of 10.3 months, enabling them to save £6,829 overall.
While the average rent contribution is £212, nearly half of children (48%) don’t offer to pay anything during their stay.
The cost of housing and catering for a returning child is increasingly having an impact on parents’ finances, with over twice as many parents cutting back on lifestyle choices.
Moving further along the lending scale, it was also interesting to see research from Key reveal that retired homeowners are increasingly considering cashing in buy-to-lets, acting as guarantors, as well as remortgaging or taking out new mortgages (including equity release) to help children and grandchildren onto the property ladder.
While parents and grandparents continue to use both savings (95%) and pension funds (21%) to give the younger generation a step onto the housing ladder, they are increasingly also looking at their own property assets to meet this need.
According to the study of 150 mortgage advisers, 19% have had enquiries from older customers about selling buy-to-lets and holiday homes, while 32% have been asked about acting as guarantors to help their children or grandchildren onto the property ladder.
That is on top of 28% who are investigating the option of remortgaging and 21% taking out new mortgages as the pressure builds on over-55s to share property wealth with the younger generations.
Intermediary respondents estimated that 47% of first-time buyers are partially helped with their deposit by grandparents or parents, with only a third managing to go it alone without any financial support.
This BOMAD boost means that brokers are confident in the market with 60% of brokers expecting a rise in first-time buyer enquiries this year.
In many ways, the gap between the older and younger generations appears larger than ever but when it comes to financial support this appears to be closing.