There were 37,300 new loans advanced to older borrowers in Q2, up 13.4% year-on-year, the latest figures from UK Finance show.
Within this, there were 5,730 new lifetime mortgages advanced in Q2, down 1.7% from the same quarter a year earlier but up 8% compared to Q1.
There were 323 retirement interest-only mortgages advanced in Q2, up 5.9% year-on-year. The value of this lending was £31m, up 24% from the same quarter a year previously.
Later life loans in Q2 represented 7.8% of all residential loans and 20.6% of all buy-to-let loans.
Will Hale, CEO of Air, commented: “The thing that leaps off the page in this latest lending data is the stark gap between the number of over-55s taking out a residential mortgage and those taking out a lifetime mortgage.
"We have a long-standing advice gap in the UK when it comes to specialist later life lending and I’d argue that it is leading to poorer outcomes for many borrowers, particularly those in or preparing for retirement. Many of these customers still have an existing mortgage, carry other debt, have low levels of pension savings and face continued cost of living pressures. Taking a holistic view of needs and circumstances both now and into the future, alongside an understanding of the innovation we have seen in the later life lending product landscape, it can't be right that the most suitable option for such a significant percentage of those over-55 is defaulting to a product transfer or a remortgage to another mainstream lender.
"Much of that is down to the fact that, as an industry, we are far too siloed: of the 35,000 UK advisers who hold mortgage permissions, only around 6,000 can also advise on equity release and we estimate that just 3,000 of these have recommended at least one lifetime mortgage in the last 12 months.
"It's also the case that many borrowers, and advisers, for that matter, are unaware of the options available or still hold outdated views of equity release. The reality is that modern lifetime mortgages are incredibly flexible, allowing borrowers to service all, some or none of the interest, with rates that are fixed for life and with protections such as certainty of tenure and a no negative equity guarantee built in – some also come with zero early repayment charges. But if advisers aren't even considering them as an option, borrowers will continue to be left in the dark and fail to access solutions that could be ideal for their circumstances.
"This issue is pressing given we have a rapidly ageing population who will increasingly need to tap into their housing wealth to fund retirement. It's clear the FCA wants lifetime mortgages, and later life lending products more broadly, to play a greater role in supporting older customers enjoy a more comfortable and/or fulfilling later life – whilst at the same time helping address broader societal challenges around economic growth and pressure on public finances. Therefore, from both a customer outcome and commercial opportunity lens, advisers should be looking at their own processes now and developing a later life proposition sooner rather than later.
"You don't need to become a specialist overnight - you can still serve your clients well by referring them to one. As we always say: write it, refer it, just don't ignore it."
Dave Harris, CEO of more2life, said: “Today's later life lending figures from UK Finance reinforce our call to make it mandatory to signpost all later life lending options, including equity release, to all later life borrowers. In Q2, just 5,730 borrowers took out a lifetime mortgage, with 37,300 loans in total to older borrowers over the quarter. Against a backdrop of 15 million people in the UK undersaving for retirement, that number should be far higher than it is.
"Lenders carry just as much responsibility here as advisers. Mainstream lenders sit at the heart of the customer journey too, and when a client reaches the end of a fixed rate, they should be pointing them towards the full range of options, not just a product transfer.
"Recent research from Fairer Finance found that seven in ten over-55 homeowners have heard of equity release, but only 13% have ever seriously considered it. If we were to collectively work together as industry to widen knowledge and understanding among both consumers and advisers, that figure would be a lot higher, and far more people would come away with a solution that could make a significant difference to their lives in retirement.
"We're clear that with the right regulatory framework in place, the lifetime mortgage market has the potential to live up to the FCA’s billing as the fourth retirement pillar. But more importantly, it would lead to much better outcomes for those who need access to capital in later life.”
Jon Hall, chief commercial officer at OSB Group, added: "37,300 later life loans advanced in Q2, up 13.4% year on year, is a welcome sign that the softening we saw earlier in the year may be starting to ease, though one quarter doesn't make a trend. Volumes are up, though partly against a soft comparator, with Q2 last year marking the post-stamp duty trough.
"It's encouraging to see lifetime mortgage volumes up 8% on Q1, even if they remain down slightly year on year, likely borrowers acting on their own timing, whether a life event, a change in circumstances, or simply having taken the time to weigh up their options, rather than any single external trigger. Retirement interest-only lending continues to perform steadily too, up 5.9% year on year, underlining that older borrowers are weighing up the full range of products available to them rather than defaulting to any one option. Both residential and buy-to-let later life loans slipped slightly as a share of their respective markets this quarter, down to 7.8% and 20.6%, a reminder that later life lending is growing broadly in line with, rather than faster than, the wider mortgage market right now."
