This action is one of nine recommendations from the BSA in its Lending into Retirement report.
The UK already has 11.6 million people over the age of 65. By 2034 it is estimated that around a quarter of the population will be 65 plus. At the same time a potent mix of other factors including house prices, student debt, the divorce rate, and the abolition of the default retirement age, mean that consumers are tending to buy later and go for longer repayment terms.
BSA research shows that around half of 25-34 year olds think they will need a mortgage that lasts into retirement, with the average age of an unassisted first time buyer already at 31.
The remaining recommendations include:
1. more availability of suitable housing options for older home-owners who want to move to a property that meets their changing needs.
2. Better cross-departmental co-ordination to rationalise Government policy on the treatment of older borrower’s housing wealth.
3. Delivery of regulation that encourages innovation.
4. The provision of clear information that empowers older consumers.
5. Working with insurers to develop policies that enable lenders to mitigate the different risks involved in lending to older borrowers.
6. Improving the availability of holistic financial planning in retirement.
7. The formation of a cross-industry alliance with other bodies focused on the needs of older consumers
8. Working towards a mortgage which adapts to the different stages of a person’s life.
Dick Jenkins, Chair of the BSA, said:
“We have been working together as a sector to look at this issue and we are making some early recommendations for change today. Some put the ball firmly in our court; others can only be delivered in partnership and a few may require regulatory change.
“The FCA has been involved in this preparatory work and I’ve been impressed with their open-minded and participatory approach. We have also sought the views of many others and these will now contribute to the next stage of the project, to deliver progress for those who want, need and deserve to buy a home of their own into and in retirement.”
BSA Head of Mortgage Policy, Paul Broadhead, added:
“It is natural for the building society sector to kick-start and lead this work. We already tend to have a more flexible approach to lending with higher and sometimes no age limits and a willingness to assess applications considering an individual’s circumstances.
“As the average age of a first-time buyer continues to increase, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending. The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK.”
Nigel Waterson, Chairman of the Equity Release Council, commented:
"Supporting our ageing population is one of the biggest challenges facing UK financial services. We wholeheartedly welcome the desire to help more people benefit from their housing wealth in later life.
"Recognition that equity release can play a bigger role in funding retirement is long overdue. As a fast growing sector with hands-on experience of lending exclusively to over-55s - including those not supported by mainstream mortgage lenders - it is a natural home for older homeowners who want to use some of their capital.
"It is also essential to draw on existing knowledge of the different risks providers and borrowers face in the later life area. To genuinely satisfy demand without resorting to short-term fixes that store up future problems, we must avoid sacrificing safeguards that are a vital part of equity release's appeal. Protections like the no negative equity guarantee and guaranteed right to tenure were established to give consumers confidence when they choose to release their housing wealth. No-one would benefit if the market for later life borrowers becomes less secure or appealing without these protections in place."
Jeremy Duncombe, Director Legal & General Mortgage Club, added:
“Encouraging more lenders to relax their age limits on borrowing is a step in the right direction when it comes to innovation in the sector. Many of the upper age limits currently set by lenders are arbitrary and have not been reviewed for some time. This means they do not reflect the changing market, where older borrowers are now increasingly common. Our aging population means that this demographic is likely to grow even larger in the future, and it’s paramount that the borrowing needs of this group aren’t neglected."
