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We haven’t yet seen the peak in later life lending

Lisa Buckley, head of mortgage sales and marketing at Leek United Building Society, discusses how changing demographics are driving the demand for later life lending mortgage products.

Lisa Buckley | Leek United Building Society
|
10th July 2019
Lisa Buckley Leek United
"The product development from lenders is increasing at pace to cater for demand as the population continues to age and we probably haven’t seen the peak of activity yet"

From recent broker research carried out by L&G Mortgage Club and ageing population data published by the FCA and the ONS, Leek United believe that lending into retirement is still to reach its peak.

Mortgage products for lending into retirement are directly reflecting the demand of a changing set of demographic profiles amongst the elderly, as they look to help children get on the housing ladder, look to re-finance their existing property or buy a new property that better suits their needs now and into the future.

Recent data from The Financial Conduct Authority found that 39% of borrowers who took out a mortgage in 2017 will be aged over 65 when their mortgage matures, up from just 22% in 2012. The average mortgage term is also increasing with 34% of all mortgages now longer than 30 years, compared to 20% in 2007. 40% of borrowers who took out a mortgage in 2017 will be aged over 65 when their mortgage matures.

The importance of lending into retirement is also backed up by a recent survey by L&G Mortgage Club which found that 80% of their lenders are seeing higher demand from brokers looking for later life products and 52% stated that lending into retirement was a priority in 2019. Furthermore, the top three reasons for consumers wanting to unlock equity were: to support younger family members onto the property ladder (63%), improve their standard of living in retirement (41%) and to pay off existing liabilities such as an interest-only mortgage (39%).

The Office of National Statistics also predicts an ageing UK population which supports the potential for growing demand for mortgages into retirement – around 18.2% of the UK population were aged 65 years or over at mid-2017 and this is projected to grow to 24% by 2037.

The product development from lenders is increasing at pace to cater for demand as the population continues to age and we probably haven’t seen the peak of activity yet as older borrowers become a more important, and growing, segment of the mortgage market. These customers will need mortgages for a variety of reasons such as ‘right-sizing’ their home, with the possibility of releasing equity to support their lifestyle or family.

Checking affordability into retirement is crucial, as it’s important any new financial commitment does not affect the customers’ ability to pay pension contributions, or cater for other bills and larger costs such as a new car or home improvements. Most elderly borrowers have seen huge increases in the equity tied up in their home, so moving to a smaller property or remortgaging their current home can release much needed capital for a multitude of purposes.

At Leek United we don’t have an upper age limit on customers looking to remortgage or take out a new mortgage that will take them into retirement. This, in line with known demographics, has helped us cater for our customers alongside underwriting each case individually. We also make sure that the mortgage is affordable as our customers circumstances may change going forward and we believe this sector of the mortgage market will continue to grow and develop.

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