"Many older customers will be particularly at risk as their circumstances may have changed since they last remortgaged. It is vital that all customers over the age of 55 do not default to a new product with their existing lender, but instead talk to an adviser who can consider all their options"
- Will Hale - Air
Later life lending platform Air is warning that the pause in expected Bank of England base rate cuts is increasing the risk of mortgage shocks for older borrowers and underlining the need for advisers to explore all options.
Analysts now expect the base rate, currently at 4%, may not be reduced further this year due to inflation concerns. As a result, older borrowers remortgaging from fixed-rate deals could see significantly higher monthly repayments.
The Bank of England estimates that borrowers remortgaging this year face average annual costs of £1,752, around £146 a month, as historically low fixed-rate deals come to an end. By comparison, the average five-year rate in 2020 was around 2.4%.
Air notes that older borrowers may be particularly vulnerable. Changes in circumstances, such as leaving full-time work, can make it harder to qualify for the most competitive fixed-rate deals. This can leave them moving onto standard variable rates, which can reach 8%, leading to substantial increases in monthly payments.
The platform is encouraging advisers to consider a full range of options for older customers, including modern lifetime mortgages. These products allow all, some, or none of the interest to be served and offer flexible capital repayments to help manage monthly costs.
Will Hale (pictured), CEO of Key Advice & Air, said, “Even moving to a new fixed rate can see monthly costs increase significantly for many customers, and that applies even more if older borrowers are moving to standard variable rates."
“Many older customers will be particularly at risk as their circumstances may have changed since they last remortgaged. It is vital that all customers over the age of 55 do not default to a new product with their existing lender, but instead talk to an adviser who can consider all their options."
“If they have a comprehensive conversation with an adviser, they can be recommended a product that is appropriate for an individual’s specific needs, wants and circumstances. Advisers who do not include all later life lending products within their scope of advice should still have a wide field of vision to ensure that products such as modern lifetime mortgages are still considered, even when affordability on mainstream products can be met."
Hale added, “For customers over the age of 55, affordability should no longer be seen as a binary concept and lifetime mortgages that allow customers to serve some or all of the interest, and/or make ad hoc capital repayments can be a suitable option. These products come with added protections such as certainty of tenure and a no negative equity guarantee, and, for many customers, can support more financial freedom, a better lifestyle and overall improved outcomes – even if the cost of borrowing may be higher.
“Lifetime mortgages have moved well beyond a product of last resort, and having a trusted referral relationship in place with a later life lending specialist can allow all advisers to deliver a holistic proposition and good outcomes for their older customers.”
