Mortgage advisers are failing the over-50s on later life lending advice by not making them aware of all their options, Key Later Life Finance warns.
It believes mortgage advisers are missing out on a huge opportunity to grow their businesses and deliver better customer outcomes under Consumer Duty rules.
Bank of England figures show more than two out of five mortgages now run past retirement age highlighting the need for a new approach from mortgage advisers – but Key warns too many are ignoring options for customers in the later life lending market.
Borrowers are often not helping themselves – many worry they will not be accepted for new loans as they do not have sufficient incomes causing them to not engage with advice and instead sleepwalk onto expensive standard variable rates or accept a product transfer from their existing lender which may not deliver the best outcome.
But Key says the onus is on advisers to engage more proactively with their older customers and properly research the wider range of options in the later life lending market. This is consistent with obligations under Consumer Duty and with wording in the recent FCA Dear CEO letter to mortgage intermediaries which stated ‘we want to see firms do more to ensure customers have considered their options’.
Analysis shows the over-50s own around £4.7 trillion in property wealth, equivalent to 78% of all property wealth in the UK. Those aged 50 to 64 own around £2.183 trillion. Government data shows average pensioner incomes in retirement are currently £20,120 rising to £29,170 for couples. Therefore, although this cohort of customers face challenges around taking debt into retirement and also potential shortfalls in retirement income, the property equity they have accumulated is a valuable asset and should form part of financial planning decisions.
Key says its analysis of sourcing searches performed in the market serves as evidence that many advisers are still not taking into account of affordability (what payments a customer may be able to make on a regular or ad-hoc basis) and too often health/lifestyle information is omitted.
Given product innovation in the sector, this customer specific information is critical in getting the best outcome.
In addition, Key says "a scope of service which is limited to lifetime mortgages can no longer be used as an excuse not to look at mainstream options". The same message for mainstream advisers applies to specialists – consider all options and ensure you have trusted referral relationships in place to allow customers access to any products you don’t offer which might deliver a better outcome.
Will Hale, CEO of Key Advice, said: “All advisers have an obligation to consider all later life lending options for over-50s customers under Consumer Duty but too few are doing that and therefore failing their customers.
“Too many focus on their own area of expertise and do not think more widely.
“There is a huge opportunity for mortgage advisers to grow their businesses and improve their customers’ lives by focusing more on this sector and ensuring they stay abreast of all the product innovation taking place.
“Technology can help with tools such as Air’s Navigator or LiveMore’s Mortgage Matcher offering efficient ways of comparing products and supporting advisers in evidencing the consideration of all options.
“Having trusted referral arrangements in place is then critical to ensuring that a customer can access all products that may deliver the best outcome for them with as little friction as possible."
