"That leaves advisers tasked with balancing the short-term requirements of borrowers against the long-term responsibilities of taking out a later life product, which may impact finances for many years."
Recent shifts in interest rates, including Bank Base Rate (BBR), swap rates, and indeed gilts – used by the vast majority of lifetime mortgage providers to price products – have created an element of uncertainty for all borrowers.
Those who might qualify for later life lending products are no different in that regard, and while we might say rates tend not to be the most important part of the adviser recommendation or borrower decision, they are of course always going to play some part.
The current environment, where product rates might feel they can go lower but won’t necessarily move that way anytime soon, may create a corridor of uncertainty for some clients; a hesitation to go ahead with, what is clearly always going to be a huge financial decision, in the hope better rates are around the corner.
Such delays and prevarication could however be counterproductive, especially given the immediate financial needs many clients face and will therefore be presenting to their advisers.
That leaves advisers tasked with balancing the short-term requirements of borrowers against the long-term responsibilities of taking out a later life product, which may impact finances for many years.
For later life borrowers, pressing needs such as home adaptations, funding care, or supporting family often outweigh considerations of cost. These decisions still however require careful analysis of the immediate and enduring implications of borrowing.
Advisers must not only address a client’s current circumstances but also evaluate the longer-term impact of products like lifetime mortgages or retirement interest-only (RIO) mortgages, which might be held for many years.
Lifetime mortgage providers have recognised this conundrum though and have been seeking to make such long-term borrowing commitments less daunting by introducing more flexible repayment options and restructuring charges.
Traditional early repayment charges (ERCs) often stretched across 10–15 years, creating certain barriers for clients who might need to make changes to their financial arrangements much earlier. However, this landscape is shifting. Many providers now offer products with considerably shorter ERC periods, for example, seven years.
more2life has recently gone further, including products with ERCs of just four years, as well as a zero ERC product. Of late Aviva has also reduced its fixed-term ERCs from 15 to 10 years for both new and existing customers. These developments empower borrowers by offering greater flexibility to adjust or exit their plans without incurring penalties.
The appeal of these modern options is clear. Borrowers facing changing circumstances — such as improved financial health, changes in property ownership, or life transitions — can adapt their strategies without being locked into inflexible terms. This flexibility also reduces anxiety around long-term financial commitments, making it easier for advisers to recommend solutions tailored to individual needs.
Advisers must therefore adopt a dual-focus approach when discussing later life lending: addressing the immediate needs of clients while ensuring they understand the potential long-term implications. For instance, while a lifetime mortgage may offer much-needed liquidity, clients must also consider how it could affect inheritance plans and equity in their home they may wish to pass on.
Education is key here, particularly when borrowers have spent the last decade or so getting used to an interest rate environment which was far from the historical norm.
The rate shift of recent years might just be seen as a bump in the road by some clients with the expectation of a swift return to incredibly low rates. We should certainly be warning them against this, or indeed believing that it is on the horizon anytime soon.
That temptation to wait for better rates is common but fraught with risks. With medium-term projections for BBR stabilising around 3–4% and limited likelihood of a return to those ultra-low rates of the 2010s, waiting may not yield benefits.
Furthermore, other variables, such as changes in property values or health, could make waiting costly or unfeasible. Advisers play a critical role in dispelling myths about rate timing and shifting focus to personalised solutions that meet immediate and long-term objectives.
The UK’s recent economic context, including fiscal policy adjustments and the rising cost of living, plus of course other factors such as future house price changes, may further underscore the need for decisive action.
Many borrowers in later life are navigating complex financial landscapes, where accessing equity through lending may be essential to maintain their quality of life. By highlighting the opportunities and risks of both action and inaction, advisers can guide clients toward informed, timely decisions.
Ultimately, later life lending is not just a financial transaction but a tool for addressing life’s evolving needs. By combining flexible product offerings with expert advice, utilising the vast array of support and resources available to them, advisers can help clients achieve their goals with greater confidence and stability, ensuring borrowing decisions today align with long-term well-being.
