"As more borrowers consider gifting to family members, the mortgage market for those over 70 is an area where we could see further growth in the year ahead"
With a growing number of mortgage options open to older borrowers, we continue to see homeowners looking to pass on their wealth to family members now, rather than leaving it in their will.
With predictions that gifted deposits will make up over 50% of first-time buyer mortgages in 2025, we could see more older borrowers turn to capital raising - allowing their family to benefit from their wealth sooner rather than later.
The latest UK Finance figures reveal that lending to older borrowers reached £5.2bn in Q3 of 2024, which was up 9.7% on Q3 2023. The number of new loans also rose 2% year-on-year, to reach 33,840.
Over the past decade, mortgage options for older borrowers have grown significantly, moving beyond just equity release - something which was also reflected in UK Finance’s figures.
While the number of later life residential loans grew by 11.32% year-on-year in Q3, the volume of lifetime mortgages fell 18.80% over the same period.
The value of later life residential loans also increased by 13.69% over the year, while the value of lifetime mortgages decreased 8.93%.
The figures also showed that the value of residential loans to those in retirement shot up by 33.33% year-on-year, while loans to self-employed borrowers rose by 15%, and by 14.71% for those still employed.
Not all mortgage lenders are willing to lend to borrowers in retirement. Specialist building societies such as ourselves however, have no upper age limit. As long as the borrower can meet affordability requirements and has sufficient savings, investments, or pension income to cover the repayments, flexible solutions are available for older borrowers - even for those over 70.
UK Finance’s figures showed a modest 1.85% increase in the value of loans to borrowers over the age of 70 in Q3, but the volume of new lending fell by 11.76% year-on-year for this age group. This could reflect the decline in lifetime mortgage lending figures or indicate that borrowers in this demographic are still unaware of their options.
Downsizing to release equity
As well as capital raising, downsizing is another option for older borrowers who might be looking to make a financial gift.
Recent figures from Hamptons show that among those who have downsized in recent years, there has been an increase in those prioritising moving to a cheaper property. The share of homeowners trading down significantly in both size and value - by at least half the previous home’s price and with two fewer bedrooms - has risen from 16% in 2017 to 25% in 2024.
Meanwhile, the proportion trading down significantly in value but not size - by at least half the previous home’s price with only one less bedroom - has increased from 27% in 2017 to 40% in 2024.
For older borrowers looking to remortgage to release capital, an interest-only mortgage could be a viable option if they are looking to downsize. This way they pay only the interest on the mortgage each month, with the capital being repaid when they downsize at a later date. This is another area where a specialist building society like ours can work with brokers and their clients and take a personal approach to underwriting.
As with any mortgage, a full affordability assessment is required and if borrowers are considering going down the interest-only route, they must also have a clear strategy in place to repay the capital at the end of the term, and this will need to be evidenced.
Mortgage brokers are well-placed to guide older clients through their choices, many of which may be unaware of the options open to them or how they can utilise the equity in their homes. As more borrowers consider gifting to family members, the mortgage market for those over 70 is an area where we could see further growth in the year ahead, and we’re here to support brokers in meeting their older borrowers’ needs.
