The Lending in Retirement Debate Isn't Going Anywhere

Over 5,000 new plans were taken out between January and March this year, a seven-year high, so who knows what figure could be reached in the future. Bower Retirement’s specialist equity release advisers believe, on average, that £3 billion in annual lending is possible by 2020, but what could drive further growth in our industry? The interest only time bomb has been pointed to as one reason for this year’s strong early start, and it almost certainly has been a contributing factor. But what of the broader mortgage landscape?

Nationwide and Halifax have recently increased their maximum age limit for mortgages meaning that borrowing options have opened up for people as old as 85, providing they can prove that they can afford repayments. The importance of this change will be seen in time, but the signal it sends out is already significant. With the greying of society an inevitability, lending in retirement will have to become a central focus for the broader mortgage industry in the coming years, but there are certain entrenched societal norms to overcome.  

In general society, there remains a persistent belief that holding a mortgage well into retirement is a sign that you have somehow failed. Whose standard we are supposed to compare success and failure to I am not sure, but this opinion will change; it has to change. According to official government data, there will be over 5 million more elderly people alive in the UK 15 years from today, so there will be more elderly people with mortgages than ever before – this is simply a mathematic fact. The stigma attached to the reality of taking a mortgage into retirement may take some time to remove, but the fact is that more people over 65 will be needing mortgages and this reality will shine a light on the debate over lending in retirement.

For equity release, this is good news. With our customers being, on average, around 70 or over this all means that our potential customer base is only going to grow in the coming years. This is one reason why advisers who currently focus on the mainstream market should be looking to add more strings to their bow by considering equity release. However, tied to this growing customer base, we should also consider that as more elderly people do take their mortgage into later life, there will have to be a rethink about lending in retirement and, in my opinion, the stigma will soon fade. 65 may as well be the new 40. Most of us will now make it to 80, and more of us than ever will make it to triple digits. The ageing of society will cause upheaval in virtually every industry, and we will all have to come to terms with a complete revolution over what constitutes ‘old age’.

Unfortunately, however, despite all the data, all the warnings and the fact that most of us know all about the ageing of society, most of us have not prepared. More mainstream mortgage providers will follow the example of Nationwide and Halifax and more providers will enter the equity release market. They will have to because more people than ever before will be looking to access lending in retirement as so many will have underestimated how long they will live and will have simply run out of money.

The above facts will, in my opinion, soon force the debate over lending in retirement back into the public forum. For years now myself, other industry commentators and the Equity Release Council have been calling for a broader debate about lending in retirement, and this will happen when more mainstream lenders up their age limits. It’s now over to more mainstream mortgage providers to consider whether it is time to focus on lending in retirement, because eventually they are going to have to. When they do, equity release must also be ready to provide a possible best alternative for the thousands who will be looking into accessing their housing wealth to fund a retirement far longer than they may have expected.