"Borrowing past what is traditionally deemed “retirement age” is not only becoming more acceptable, but also more commonplace"
One of the most common misconceptions surrounding the mortgage market is that borrowing in retirement is no longer an option, but this couldn’t be further from the truth. The later life lending market is evolving at a rapid pace and according to research carried out by AKG Financial Analytics, the sector was worth up to £153.9 billion in 2022.
Driving this growth is soaring house prices, longer term mortgages and the rising cost of living, which is leading many people to take their first step onto the property ladder later in life. This means they are entering their 50s, 60s and 70s still repaying the debt. Lifestyle factors such as people living longer healthier lives and choosing to work past the traditional retirement age are also helping to fuel the market’s continued growth.
There has also been an upward trend in intergenerational lending, with parents and grandparents tapping into the equity in their homes in order to help their children and grandchildren get a foot on the property ladder. This trend in particular is likely to grow significantly over the next few years as rising interest rates and a slowdown in the housing market continue to present challenges to those trying to buy their first home.
Looking ahead to the next 12 months and beyond, the evolution of the retirement lending market looks set to continue as a growing number of mortgage lenders seek ways to cater for the changing dynamics of both the retirement landscape and the wider mortgage market.
Product offerings such as retirement interest-only (RIO) mortgages that allow borrowers to tap into the equity in their home by taking out a mortgage against the value of the property and repaying the interest on a monthly basis have grown significantly since they were first introduced in 2018. Similarly, family assist mortgages are also growing in popularity as those aged 50 plus look at ways to help family members onto the property ladder.
As with all types of lending, the size and type of loan a borrower can take out in retirement varies between lenders and depends on a number of factors such as income levels and affordability. At Loughborough Building Society for example, we offer mortgages on an interest-only basis, as well as repayment or part and part mortgages with no maximum age limit and terms of up to 35 years.
Applicants can also use the sale of their property as a repayment strategy up to 60% loan-to-value provided the mortgage is taken past the age of 80 years old. There is no minimum equity requirement and loans range from £25,000 to £500,000, or up to 4.5 times single or joint income are available, with the second income multiple assessment of 3.5 times based on the balance only when the oldest applicant reaches age 80.
The age at which the borrower wishes to retire will also play an important role in any decision to lend and affordability is based on each applicant being able to repay the mortgage should they outlive their partner.
Borrowing past what is traditionally deemed “retirement age” is not only becoming more acceptable, but also more commonplace, as those aged 50 and over seek ways to tap into equity acquired in their homes to finance the lifestyles they want in retirement or to help family members achieve their own home ownership goals.
Brokers with older clients wishing to borrow money should ensure they familiarise themselves with this growing area of the mortgage market by speaking to lenders that can guide them through the workings of this ever-growing market and provide practical lending solutions for later life borrowers.
