Advisers industrywide have a duty to raise awareness of later life lending

Mortgage brokers will be well aware that first-time buyers are getting older – the average age is 36 and one in five is estimated to be 40-plus.

They will also be aware that more than half of borrowers choose 30-plus year mortgage terms which inevitably means the average 36-year-old first-time buyer will be funding their mortgage until they are 66 or even older. They might have retired; they might be working part-time because of ill-health or they might be happy to carry on working. Whatever their circumstances they need more comprehensive mortgage advice.

The concern is that mortgage brokers across the industry are not as aware of how the later life lending market has changed and that lack of awareness means they are missing out on a massively growing market. Raising awareness of the opportunities in the market and the innovative products that can provide good outcomes for more customers is vital. Professional development in the later life lending market through partners such as Air Club will help boost business.

Equity Release Council data shows nearly half (48%) of later life lending borrowers are aged 55 to 60, and more than 73% are aged 55 to 65. Traditional equity release customers aged 70 to 80 are still important and represent a £2 billion to £3 billion annual market but just as first-time buyers are getting older later life lending customers are getting younger.

The later life lending opportunity for advisers is growing in response to changing needs and demand from clients as they look to manage mortgages through retirement with a focus on affordability.

Supporting the new generation of clients

Mortgage brokers need to help clients to understand their later life lending and mortgage in retirement options but they need to be aware of the options themselves. My view is that all first charge mortgage brokers, right across the industry, should be taking the appropriate CeRER qualification in order to be better prepared for customers’ later life lending needs. Air Academy can help with training that not only enhances industry knowledge and professionalism but also supports continuous business growth

While mortgage brokers do not necessarily need to advise on the products as there are specialists who can, they have a duty to offer choice to clients. That means having comprehensive conversations with clients offering consumer-focused, comprehensive advice that considers all available options and meets regulatory standards including Consumer Duty.

All lending options need to be appropriately considered and customers encouraged to prioritise interest payments over roll-up where feasible. Later life lending products should be integrated into the advice process to bridge mainstream and specialist markets to meet the needs of individual client circumstances.

Understanding the new generation of products

Later life lenders have transformed their products offering higher LTVs, shorter fixed early redemption charges and increased flexibility around regular payment options. Modern lifetime mortgages are a suitable option for a significant percentage of over 55s customers enabling them to actively manage their borrowing as their circumstances change through later life.

They can choose their monthly payment and payment term subject to minimum and maximum terms and there is no set percentage of interest payments. Rate discounts can be available depending on the product and are based on the customer’s  circumstances, how much they choose to pay and for how long and whether they wish they can make voluntary overpayments. Later life lenders have adapted to affordability and advisers should too.

Other options have evolved including retirement interest only mortgages, term interest only mortgages, long-term fixed rate products and mainstream mortgages specifically aimed at older borrowers offering more options for customers with affordability.

The market is changing rapidly and is very exciting with technology playing a key role while sourcing  platforms such as Air can help advisers with their product research and recommendations.

No longer is there a one product fits all approach and brokers need to learn about the wide range of options and how they can support their clients.

Navigating the new generation of products

As a leader in the later life lending market, Air has developed its Later Life Lending Navigator Tool which enables advisers to identify solutions for clients whether they are equity release, interest-only products, or retirement-focused lending options.
 
It focuses on affordability considerations to help narrow down the range of potential products which may be suitable for the client and then enables advisers to compare the total cost of borrowing across lifetime mortgages with repayments and without repayments as well as residential mortgages and retirement interest-only mortgages.

The Navigator tools put affordability up front in the advice process and ensures all options are considered so that advisers can establish their client’s ability to make payments.

Advisers can build a detailed picture of their client’s ability to make payments and, given all-new products within the later life lending arena offering some provision for ad hoc or ongoing repayments, the tool will also guide product choice and ensure that all options are fully discussed as part of the advice process.

A new generation of later life lending customers is emerging alongside traditional equity release customers in a market showing strong signs of recovery. 

Advice is becoming more complex and advisers need to respond. That will require taking a wider view of the mortgage market and working with other specialists where appropriate. Advisers will benefit from huge opportunities in a rapidly growing market if they do so and clients will receive the good outcomes they need.