Understanding needed to meet demand of those looking to help loved ones onto the ladder

One of the big drivers for later life lending that we have seen of late has been the desire to help loved ones access the housing ladder.

This borrowing is not motivated by the individual client’s needs, but instead providing a helping hand to children - or perhaps grandchildren - who aspire to homeownership yet are struggling to achieve that off their own back.

This challenge has only become more pronounced in recent years, particularly off the back of the incredible growth in house prices seen since the pandemic. Combined with the general economic uncertainty, and the increase in borrowing costs since the mini Budget debacle, there is no shortage of would-be homebuyers who are unable or simply unwilling to attempt to purchase a property alone.

As a result, help from older borrowers can prove incredibly useful, with a host of options open to them.

There are demographic factors at play too. People are increasingly having children later in life and the typical ages at which people enter the housing market are also on the rise. These changes mean that we are seeing a growing demand from borrowers in later life than might have been the case just a few years ago.

How later life borrowers are helping their loved ones

The most straightforward route comes from handing over a gifted deposit, supplementing the money already saved as a downpayment. These funds can be raised in a variety of ways, most typically through a remortgage with capital raising.

But there are other ways that assistance can be provided, if the lender is willing to be a little more innovative in their product design. We know that brokers are seeing increased interest in the Bank of Mum and Dad willing to contribute to the mortgage without any ownership rights on a Joint Borrower Sole Proprietor mortgage, with notable numbers of older borrowers more comfortable borrowing alongside their loved ones rather than simply gifting a deposit.

Similarly, there are occasions when a Family Assist mortgage is more appropriate. This is where the older person uses cash savings or equity held in their own property as security on the mortgage, boosting the money saved for a deposit to the point that allows borrowers to effectively access mortgages at 100% LTV.

This can be a particularly attractive option for later life borrowers, since it doesn’t actually involve handing over any money - their savings or equity are still their own, just simply being used as security, meaning they will be able to access that money once the term is successfully completed.

Flexibility is crucial

Recognising the demand from later life borrowers is only the start; it’s then up to lenders to provide the funds needed. It’s something that we have focused on extensively at Mansfield and having the mindset of actively wanting to lend rather than taking a tickbox approach.

It’s very easy for lenders to be closed off, to pick out certain aspects of a case that will make them an immediate ‘no’, such as the oldest applicant’s age, income sources, or even the type of property being borrowed against.

But truly flexible lenders embrace a different approach and focus on building a more comprehensive picture of all of the relevant information about a case before delivering a decision.
In the end, demand from older borrowers is only likely to increase in the years ahead as a result of the combination of house prices and changes to borrower demographics. If we are to meet that demand, and serve the needs of these borrowers, then it is incumbent on lenders to adopt a more flexible, understanding approach.