"It’s all about providing appropriate choices for those looking to fulfil a better retirement or to help family members onto and up the property ladder."
While the later life lending market is fast becoming an increasingly prominent conversation for intermediaries, this is also an area of the mortgage market which is often misunderstood as all too many people remain unaware of the potential options available to them. With this in mind, it was encouraging to see positive and direct action being taken by the Equity Release Council via the publication of a new ‘jargon free’ guide to foster clearer communication throughout this complex sector.
The need for greater clarity, education and the correct interpretation of the solutions on offer to help deliver greater levels of financial freedom for the older generations is patently evident. Research earlier in the year from Perenna revealed that financial anxieties driven by mortgage affordability and accessibility in the over-55s are rife, with over a quarter (28%) of this age group fearing they wouldn’t be able to afford their mortgage if it moved onto their lender’s Standard Variable Rate (SVR).
In addition, three-fifths (60%) said there was a lack of choice and financial products tailored to them, and 36% found their mortgage restrictive because of their age profile. Nearly a fifth (18%) of respondents said mortgage repayments have restricted their ability to travel or engage with leisure activities. A further 17% reported an impact on their financial stability and ability to support their family, while 9% postponed retirement plans to pay off their mortgage.
Over the years, market dynamics and borrowing demographics have changed significantly to emphasise the growing importance attached to the later life lending sector and this dependence is only likely to grow over the course of 2024. Within this, retirement interest-only (RIO) mortgages can provide an important option for older generations who are looking to use significant amounts of equity for a variety of purposes. Although, as with all the other components within this sector, information, innovation and a good, professional advice process remain vital in ensuring that this product type best fits the immediate and future needs of those borrowers in their twilight years.
Although it’s been around for a while now, it’s fair to say that this is a product type which has typically underperformed from a pure volume standpoint. However, we have started to experience a significant uptick in enquiry levels over the past few months. From our own internal research, since the start of 2024 we have seen a 38% year-on-year increase in brokers sourcing later life products.
Focusing on our RIO proposition, we have experienced also seen 300% rise in applications over this period. This is largely due to the launch of our first no fee, no ERC fixed rate RIO product which has proved to be the real catalyst for this uplift, although it prudent to point out that this comes from a relatively low base point.
It’s all about providing appropriate choices for those looking to fulfil a better retirement or to help family members onto and up the property ladder. As a society, we remain committed to servicing the needs of borrowers from the beginning of their homeownership journey right through to the end of their lending cycle. And our intermediary partners play a vital role in helping people to carefully plan for the future and commit to such products only when they have carefully considered all their options alongside those of their loved ones.
