Stop thinking product and start thinking solutions
Chris Buchanan is product director at Legal & General Home Finance
As someone who has worked in mortgage product-related roles for 20 years, I never thought I would find myself saying this; but it’s time to acknowledge that the later life lending market is no longer just about the product.
It’s easy to forget sometimes how later life lending has evolved – even in just the past couple of years.
Let’s shine a light on the residential mortgage market, for example: we have seen many lenders increase the maximum age limits on their products, opening up borrowing to older customers who were previously unable to get a mortgage.
The Financial Conduct Authority (FCA)’s new Retirement Interest Only (RIO) rules are also positive news, as they increase the availability of interest-only lending to older borrowers, which I believe will give rise to a new wave of later life lending innovation.
However, we shouldn’t pretend that residential interest-only mortgage products that spring up as a result from this are a solution for all retirees. They are specifically designed for a cohort of borrowers with a good level of affordability throughout retirement.
That leaves those without the ability to make monthly repayments, so there is a need for alternative options.
This is where the lifetime mortgage market continues to play a central role for thousands of Britain’s older homeowners.
The security of fixed rates for life and a growing range of flexible solutions that enable customers to take what they need now and withdraw more later, if they need it.
New solutions like our Optional Payment Lifetime Mortgage (OPLM) also offer improved choice, giving customers the option to continue to make monthly interest repayments, but stop at any time and remain in their homes for life – all without the need to pass standard mortgage affordability criteria and have a capital repayment strategy – and without exposing them to the potential for interest rate rises.
But while all these new products are a positive step for the market, how are they viewed by consumers?
After all, customers need solutions, not products. They need solutions for whatever plans they have for retirement.
Whether it is paying off an interest-only mortgage, raising money to fund their retirement or helping their loved ones with a deposit for their first home, our research has shown there are a whole host of reasons consumers opt for a lifetime mortgage.
Lenders and brokers understand products because that is our expertise, but how often do we as an industry stop and consider what customers are really thinking? How often do we reflect on what information they need, and when they need it?
If we think about our parents, grandparents and even our friends approaching retirement age; they are likely to need varying levels of guidance, advice and access to finance reflective of the different stages of their retirement.
There is no one-size-fits-all retirement solution here and, for consumers, this is where it can all feel very complicated.
Whether it’s choosing between a mortgage or a lifetime mortgage or the need to speak to an equity release specialist if their mortgage adviser doesn’t have the necessary qualifications; as an industry we need to think about how we take our products, our advice and our literature and present it more holistically to customers as solutions.
How many customers give up their search for solutions because of these complexities?
The FCA’s interim report to their Mortgages Market Study concluded that the industry needs to provide more tools and information to help customers find the right mortgage; choose an intermediary; and signpost these customers to the alternative options.
We’ve already taken steps to this end with our intermediary partners, making our lifetime mortgages available on Twenty7Tec’s residential mortgage sourcing platform so that mortgage intermediaries can also include lifetime mortgages when talking through the options with their clients.
Thinking outside the box’ is an all too often used cliché, but this is exactly what the mortgage industry needs to do.
We need to think outside the parameters of product and advice siloes and instead consider what consumers really need and how we deliver that to them. If we can do that, we’ll be able to provide thousands, perhaps millions more of Britain’s retirees with the mortgage solutions they need for a better retirement.