Later Life Lending

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Let’s embrace age

Welcome to Mortgage Introducer’s Later Life Lending supplement, whatever age you are.

If we’re honest, age is not something we always truly embrace here in the Western world.

Head to China or India and you’ll see just how much the elderly members of a family are cherished and positively revered for their wise perspectives on life, accumulated over many years. Seniority is a badge of honour, not something of which to be embarrassed, or to airbrush out of the picture.

Not so much here in the UK, where our culture celebrates the zest of youth and favours compliments that we look younger than our years. We need to do better.

The later life lending market is an area of financial services that is trying to do just that, enabling those in an older demographic to enjoy their lives to the full, free from financial worries and strain.

We’ve seen a number of businesses spring up in recent years that actively celebrate the opportunities that come with age, adopting brand names with a positive nod to the benefits of age. Viva Retirement Solutions and more2life are just two, and they’re participants in our special round table, made possible by our main sponsor for this supplement, the later life lending platform Air.

It’s a lively, thought-provoking discussion that takes an in-depth look at how the later life lending market is evolving and considers the wealth of opportunities there are today for advisers to help over-55s.

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Our expert panel reflects on both the potential of the market and its challenges, in what proves to be a fascinating read for anyone who’s keen to explore the opportunities that it offers as a specialist area.

So, as a society, let’s try to move away from agedenying … or even age-defying. With age comes experience, with age comes freedom – and, arguably, we should aspire to both.

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Is the cost-of-living crisis fuelling equity release gifts to children?

The latest evidence confirms that older homeowners, feeling financial strain, are releasing equity to maintain and enhance their lifestyles – but they are also giving financial support to their children to help with their day-to-day financial burdens.

Figures from Key Later Life show that gifting continues to be a major motivation for releasing equity, with 20 per cent of customers releasing equity to do so. But older homeowners are not doing this to their own detriment – they are still prioritising their own needs first, with nearly two-thirds of all borrowing being used to manage debt, including mortgage repayments, the remortgaging of existing equity release plans, and clearing unsecured debt, typically credit cards.

In terms of the money given to relatives, the one in five who do so are giving considerable amounts, with the average gift exceeding £50,000. The most common reasons for helping loved ones in this way are to help them get onto or move up the property ladder, provide an early inheritance for general day-to-day living, help them repay debts, and also help with university fees.

Ever-increasing plan flexibility is encouraging more and more homeowners to look to equity release to ease them and their families’ finances and maintain their standard of living. At the end of Q3 2022, there were 582 equity release

products available on the market, offering great scope for advisers as well as their customers.

Commenting on the findings, Will Hale, CEO at Key Group, said, “While there is no doubt that we did see the market return to more normal post-pandemic trading conditions in Q3 2022, the [recent] political and economic turmoil has, like the mainstream mortgage sector, affected the rates and LTVs available. However, the cost-of-living crisis has continued to bite, inflation has hit double digits, and older customers moving from fixed-rate mortgage deals to their lenders’ standard variable rate have been shocked by the difference.

“With over-65 homeowners sitting on an estimated £3tr of unmortgaged property wealth, and four in five customers who progress to speaking to one of our advisers looking to address a financial need, there is clearly a key role for the sector to play in helping older customers navigate the current economic challenges and still live a fulfilling later life.

“Modern lifetime mortgages have

come a long way in a short period of time, so when you consider features such as drawdown, the ability to serve interest, and/or the opportunity of ad hoc capital repayments free of ERCs, there is more opportunity than ever for customers to manage their borrowing carefully. The proliferation of fixed early repayment charges, which typically disappear after around ten years – although it can be as few as five years – also mean that remortgaging these plans in future is a real option for many people.

“In these market conditions, more than ever before, specialist advice is crucial. Advisers must be prepared to probe and challenge customers on their wants and needs, making them acutely aware of the implications of decisions in both the long and short term, and ensure highly personalised recommendations aligned to individual circumstances. All options should be considered, as equity release won’t be right for everyone.”

Not surprisingly, it is widely anticipated that the trend of gifting will continue. It will be interesting, as 2023 unfolds, to see how this develops.

Dean Mirfin equity release specialist, Dean Mirfin Ltd

The future of equity release: what’s in store for the year ahead?

CHANGING FACE OF CUSTOMER DEMAND

Alice Watson head of marketing –insurance, Canada Life

As we enter a new year and think about what the future holds for the equityrelease market, it’s equally important to look back on some of the key lessons from 2022.

Not only did we witness significant investment-market turbulence in the last year, but political turmoil caused by the mini budget and the costof-living crisis also had a profound impact on the mortgage market.

So what does this mean for the future of the equity release market, and how will this affect how advisers support their customers?

UNDERSTANDING UNCERTAINTY

Uncertainty was a key theme of 2022, from both a political and economic perspective. As a result, UK 15-year gilts, the typical benchmark for pricing lifetime mortgages, increased from 0.8 per cent at the beginning of the year to a peak of five per cent at the end of September. This had a significant impact on the market, with the number of available product options diminishing from approximately 900 in early September to about 150 in early October as funders reduced their appetite for lending volume.

Add to this the increasing inflationary pressures due to the impact of the war in Ukraine on energy costs and post-pandemic supply-chain issues putting pressure on household budgets, and we’re likely to see an increase in financial vulnerability given increased costs of living.

In a higher interest rate environment, and with the OBR predicting the current recession will last until 2024, we expect to see a shift in customer demand. A greater number and proportion of customers will look to release equity from their homes to meet their immediate needs, rather than to support their lifestyle wants or to give gifts to help others.

THE ADVISER IMPACT

Not only will this influence how advisers provide advice to their customers, but it will also affect how they conduct their business. New and existing customers are likely to require more ongoing guidance and support, to ensure that the implications of requesting access to further funds through drawdown facilities are properly understood and that good outcomes will be secured. As such, advisers will need to be more vigilant, considering affordability at younger ages to ensure optimal customer outcomes, as well as spending more time explaining the impact of higher interest rates on mortgage debt.

From a business perspective, the

likely increased demand from needsbased customers seeking to combat the effects of inflation will require high levels of operational efficiency to protect margins, as average loan sizes are likely to fall. Similarly, the higher interest rates that are likely to remain over the next few years, given the increase in UK gilts, will require enhanced disclosure under the FCA consumer duty and will have an impact on re-broking opportunities.

THE ROAD AHEAD

Despite the challenging market conditions of last year, there are still plenty of reasons for advisers to be optimistic as we enter a new year. Demand for equity release will continue to grow as the UK population gets older and some look to increase the income they have in retirement, and customers continue to sit on substantial property wealth. While advisers will need to consider taking additional steps to meet the standards required by the new FCA consumer duty, in the long term these steps will drive opportunity, as the industry comes together to deliver better outcomes –as advisers have always strived for. 

Older homeowners helping their offspring onto the property ladder

Stuart Wilson chairman, Air Club

Time waits for no-one, and this is just as true within the later life lending sector as it is within other parts of the mortgage finance landscape.

By the time you read this, we will be into 2023, and I suspect we’ll have a much better idea of what the rest of the year holds for us – certainly from a product point of view, but also in terms of provider appetite, consumer demand, rates, and how all of this meshes together to deliver the market we deal with.

There’s no doubting that 2022 presented some sizeable challenges; however, one thing remains certain in my mind – the strong foundations that exist in the sector. This is not a specialist area of the market that is going to be required less in the year ahead. Far from it.

If anything, the fundamentals of our economy and the issues that people are confronting – particularly those more likely to be on fixed incomes, such as older homeowners and those in retirement – are solidifying the need for a product solution that allows them to access the equity they are likely to have built up over the years.

Let’s not forget that we have a prospective customer base that –depending on when they bought –could be (literally) sitting in properties with equity worth many hundreds of thousands of pounds, uncertain about how they can access this wealth, and perhaps ignorant of what a modern-day later life lending product could actually do for them.

Some of the media they will read is

unlikely to be helpful in that regard. Many of the negative comments I see written about equity release usage, for example, are, I’m afraid, still based on an outdated notion of the products themselves, or a viewpoint that focuses on rate rather than need.

They also tend to disregard product innovation – some of it not even that recent – that allows clients things like flexibility around early repayment without charges, or protection for inheritance, or indeed simply making interest payments, rather than accepting roll-up across the full amount for the full term.

The fact that these are now built into many equity release/later life products makes them much more appealing to more customers, and represents a huge step away from the products of yesteryear, putting clients in much more control of their borrowing.

All that adds up to later life lending being a far more attractive option for older homeowners, especially at a time when, for example, other options might not be as accessible or affordable, or when the need for a relatively quick, if carefully considered, solution might be greater than at other times.

One theme of 2022 that I anticipate will continue well into 2023 and beyond is why those in later life are “needing” to access the equity within their properties.

It will have been obvious to advisers steeped in this sector that clients, particularly over the last 12 to 18 months, are much less likely than they once were to be focused on lifestyle uses for any money they release from their property.

So that, while, of course, there will be some clients who intend to use the money for a new car or a holiday, etc, they are much more likely to be using it to meet increased monthly outgoings, paying off debts with higher rates, or specifically to help family members with

similar issues – and, of course, we have seen a substantial increase in the number of older homeowners seeking to borrow in order to help their offspring onto the property ladder.

That latter point is something for mainstream advisers to keep in mind, particularly for those with wannabe firsttimer buyer clients who have not been able to make their property-owning dreams a reality.

It may not be an obvious discussion to have with those clients who may have seen their ability to secure the loan size they need recede in recent months – due to what has happened in the firstcharge mortgage space – but even those who are not active in later life lending themselves may well be able to provide these first-timers with a solution if there is an option for parental help.

Easy access to large sums of money to bolster deposit levels may not be on the cards for many would-be Banks of Mum and Dad, but if they are willing to consider later life lending options, then there could be chances for mainstream mortgage advisers to work with specialists in our sector in order to make these purchase deals happen.

One thing is certain: the need for advice in the current environment (and looking ahead) is going to be absolutely vital.

Older homeowners and their offspring will have a lot to think about, given what is available to them in this space, but will also need advice right across the piece.

I would urge all mainstream mortgage advisers who are not active in the laterlife lending space to seek, contact, and network with the kinds of specialist advisers who are active within Air. The quality is supremely high, and by working collaboratively it should be possible to get many more individuals into homes, and to up the number of purchase transactions over the course of 2023.

Is the mortgage market burning out?

The Mortgage Mum is setting up a later life lending division, with plans to apply the mortgage broker’s touch to the equity release and later life lending spaces.

Sarah Tucker (pictured), managing director of The Mortgage Mum, founded the business in 2019. The firm has grown steadily and now includes 32 brokers.

Tucker said the later life lending market is an area of the industry she always intended to approach.

“We think the female touch will work really well in this space, with an extra layer of “Mortgage Mum education” wrapped around it,” she said.

Tucker said she intends to grow the main brand using the same model, which focuses on the value the firm can add for their clients.

“There is still so much that consumers do not understand about equity release and later life lending, and there are existing barriers that need to be broken down,” she said.

AN “EXTRA EMPATHY” SERVICE PLAN FOR EQUITY RELEASE AND LATER LIFE LENDING

Tucker says she feels passionate about overcoming some of the obstacles found in this area of the industry by creating a safe, inclusive space for clients. She added that the firm is working closely with private client solicitors to ensure it serves clients in the best way, and to learn from their success.

“The service needs to encompass extra empathy, care, and compassion – with a personal touch that has a human element to it. And although historically we have worked online to serve our mortgage and protection

clients, we have needed to create a different client journey for this area of the market,” Tucker said.

With that in mind, she said the firm needed to find a way to serve the whole of the UK in a way that felt right for the customer.

“With our team being so much larger now, we have been able to create the perfect team who have the ability to service all areas with a face-to-face presence between them, as well as an online one,” Tucker said.

UNIQUE OFFERING

Tucker wants to use the firm’s profile to provide some additional education on the later life sector, and she thinks her client journey will be unique.

“It will offer clients a blend of online service and face-to-face, with the right amount of empathy, professionalism, and human connection,” she said.

She also intends on involving family as standard practice in transactions, and added that the firm will be offering

a full trial to ensure everyone involved feels entirely comfortable and at ease.

“We cannot wait to provide a bespoke service that we have spent time creating in-house to ensure it ticks all the boxes,” Tucker said.

EXPECTATIONS FOR THE LATER LIFE LENDING MARKET IN 2023

Tucker said that, with quarterly figures showing an increase from £4bn to £6bn annually in the later life space, it is clearly a growing market.

The current cost-of-living crisis and the outlook for the economy could add to this area of the market, she believes, with more households needing to access equity for all sorts of reasons.

“I also think, with the additional profiling and education we can offer here at The Mortgage Mum, that we have the opportunity to expand the clientele, allowing those who would never have considered this an option to look into it as a potential solution for them,” Tucker said.

PLANS TO EXPAND

Looking to the future, Tucker said she plans to use the firm’s online presence, including social media, profiling in the media, and webinars, to improve awareness.

However, she said that the brokerage’s core focus is on offering education and value for customers.

“People trust our brand, and so this is the perfect time to launch into a space that holds some fear and negativity, and potentially re-educate consumers on the options available, as well as what later life lending really looks like. We have the opportunity to shine a positive light on the space,” Tucker said.

Sarah Tucker

Launch of later life lending and equity release services includes “a different client journey”

Later life lender LiveMore has reduced the rates on all its products by 50 basis points.

The lender announced that rates now start at 6.19 per cent for those with a £999 product fee, and 6.34 per cent for the fee-assisted range, which has no product fee and a free standard valuation. Fee-assisted standard legals are also available on all remortgages.

LiveMore also offers retirement interest-only (RIO) and fixed-term mortgages, where customers can choose to pay on an interest-only or capital-repayment basis. Borrowers can choose either a five- or 10-year fixedrate product.

The lender reduced the age of access to its RIOs from 55 to 50 years old and

enhanced its criteria.

“It’s been a busy start to the year for us, and we are gaining momentum with expanding our criteria and lowering the pricing by 50bps across our product range,” Phil Quinn (pictured), head of intermediary sales at LiveMore Capital, commented.

“As we move farther into 2023, we will be further enhancing our product offering, providing even more flexibility and choice to brokers and their clients. We can help the underserved market of 50- to 90-plus-year-olds with credible and affordable home loans where other lenders are unable or unwilling to help.”

The specialist lender also reduced rates in December across the whole of its product portfolio by at least 106 basis points.

LiveMore cuts all rates by 0.50% Pure Retirement welcomes new head of distribution

Equity release specialist Pure Retirement has appointed Scott Burman (pictured) head of distribution.

Burman brings with him a wealth of experience in the property and finance sectors, backed up by a CeMap qualification that he attained in 2002. He spent 12 years working with the Lloyds Banking Group, first as a business development manager (BDM) before progressing to regional manager, national account manager, and new homes manager.

Most recently, he has enjoyed a seven-year stint at Countrywide, ultimately serving as divisional mortgage services director for the Central and Anglia region, overseeing six sales managers and over 50 mortgage advisers.

Burman will join Pure Retirement’s intermediary sales team, which now offers unprecedented levels of adviser assistance and support with the incom-

ing changes brought in by the FCA’s new consumer duty. He will lead a team of four regional BDMs and four corresponding regional telephone BDMs, in addition to a team of office-based staff focusing on relationship management.

“Being in the financial services industry for a quarter of a century has allowed me to witness the growth and increasing pop-

ularity of equity release,” Burman said. “It’s exciting to be joining the market at a time when it’s enjoying an upward trajectory in spite of challenging trading conditions.

“Additionally, I’m thrilled to be joining a market leader with a track record in providing excellent adviser support, especially with the upcoming FCA consumer duty on the horizon, and the subsequent premium on lenders helping their networks accordingly.”

Paul Carter, chief executive at Pure Retirement, remarked that appointing someone of Burman’s calibre and experience “underlines the regard in which we hold our adviser network.”

“We look forward to him leading our intermediary sales team to even greater heights,” Carter added. “We’ll hopefully begin to see the market landscape move back toward where it sat before the mini budget, and aiding brokers in best supporting clients will be paramount.”

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Phil Quinn

Scott Burman

LIVING AND BREATHING LATER LIFE LENDING

“My very first equity release case was a lady whose husband was dying of cancer,” recalls Stuart Wilson, chairman of Air Club and, until recently, CEO of Air. “She was making herself severely ill because of stress, whilst hiding all the financial pressures such as bills and the threat of bailiffs knocking on her door.

“So, in the end, out of sheer desperation, she went to her solicitor to say, ‘Help, what do I do?’ The solicitor rang me up and said, ‘Can you help this lady out?’ And I did – £12,000 from Northern Rock. She came back to me about eight or nine months later and said, ‘Is there any chance I could get another £3,000? John’s died, and I’d like to give him a good send-off.’”

Wilson continues, “Within about two and a half weeks, that money was in her account, and that’s always stuck in my head as a case that sums up what the product is all about – the pure joy of being able to actually help somebody in that moment of need. It was a satisfaction that cannot be compared to anything, and every adviser who deals with older consumers will

tell you similar stories. It is very emotional.

“From all my years in pension sales, or protection, or savings, or whatever, I never had that with any of those customers because I was a commodity to them. I provided a product at the right price, and then they’d forgotten me by the end of the following week, once the product was operational. This market is different.”

Twenty years on from that first, memorable equityrelease customer, Wilson is still as passionate about the later life lending market and its older clientele.

“It’s the last group of customers who genuinely believe in and want and are grateful for good service,” he enthuses. “One of the reasons that I love this sector so much is the passion that comes from the advisers and that in turn comes from the consumers.

“It’s an engaging sales process. It’s not something you can do as a one-off. You’ve always got to go back to second or third appointments with customers and engage with their families. So it’s a really personally engaging market in which to work.”

Having worked in financial services for 33 years, Wilson has a wealth of experience, both in later life and mortgage advice. He headed up operations with Sun Life and the Inter Alliance group before founding Air in 2007. Its Air Club represents more than 8,000 advisers in the later life lending space, supporting them to drive commercial benefits by providing them with training, technology, and innovation. It points to £29m in commission received by its members in 2021, estimating that is £3.8m above what would otherwise have been earned from lenders.

Since 2018, the Gloucester-based business has been part of Key Group, the later life lending experts specialising in equity release who include the lenders more2life and Standard Life Home Finance within the group.

“It was about us wanting to become a bigger fish in a bigger pond,” says Wilson of Key Group buying a stake in Air. “We could see that the market was going to rise; therefore, it was either borrow to invest or take an external investor – and Key Group made the right

Stuart Wilson

For Stuart Wilson, chairman of Air Club, the later life lending market is different from other areas of financial services. Simon Meadows hears how helping older borrowers in need is hugely rewarding, even emotional

overtures, the right contractual promises, guaranteeing what we’d built, the security of the staff, the location, and the brand.

“For Key Group it completes their story. They’re multifaceted. They’ve got the biggest provider in more2life, and they’ve got the biggest B2B distribution model in the form of Air. We’ve got eight and a half thousand members who use services from Air, and none of them is committed contractually. So it’s a relationship that is not built on contractual obligation – it’s built on total, two-way trust.”

Key Group describes Wilson as having a strong entrepreneurial insight into where the market is heading – and certainly, he identifies a shift in the reasons people seek equity release today.

“We’re in a recessionary period; financial duress is at the forefront,” he explains. “The old around-the-world trips have almost disappeared. People aren’t borrowing in retirement for luxury reasons. Now it’s survival and necessity. Huge amounts of equity release and lifetimemortgage lending last year were about helping their children and grandchildren bypass the increasingly difficult affordability challenges to get a residential first-time buyer mortgage and needing a bigger deposit. So the Bank of Mum and Dad was an outlet.

“What I predict will happen this year is that people will strip it down to only doing what they have to do. They won’t do the extra borrowing. If the kids need £30,000 to get on the housing ladder, their parents will just borrow the £30,000– they won’t also roll up the expense of a new car and a holiday. I’m really positive that we’re actually going to see an increase in customers this year. But I think overall the borrowing level will be lower, which is not a bad thing. We don’t want to gratuitously feed borrowing for the sake of it.”

Wilson believes that Air can instill confidence in advisers, who are coming to terms with a new lending landscape.

“Some advisers are very gung-ho, positive thinkers,” he points out. “But there are advisers, especially new advisers, who, six months ago, were recommending rates that began with a two. Now they’re recommending rates that begin with a seven. So that makes them uncertain. But, interestingly, consumers, in most cases, couldn’t care less. Let’s not forget, interest rates back in 1990 were 15.4 per cent on a normal residential mortgage. The older, long-in-the-tooth advisers, they know it’s a cyclical thing.”

Air provides financial professionals, from advisers to lenders, with digital sourcing tools to support their business growth. Wilson was inspired to develop these after seeing a traditional craftsman at work.

“About 10 years ago I was living and working in Gloucester and the cathedral was in the middle of a multi-million-pound restoration,” he remembers. “One lunchtime, I watched this guy come down the scaffolding, using the rope and pulleys and carrying a great big bag. He’d been brought in as one of the leading

stonemasons in the world to do this work. What dawned on me was that he could be the best stonemason in the world, but without his toolkit, he just couldn’t use his skills – he would be mediocre.

“In the last 12 to 18 months, Air has built a toolkit for advisers that ranges from online blogs, videos, and calculators to bespoke software, templated marketing material, and guides that can help advisers to educate consumers on their options, other borrowing alternatives, and the tax implications. Fifty-two weeks of the year we provide everything from webinars, for example, on how to generate leads or how to optimise your website, to the latest information on markets, depending on what you want to do. So we’re really quite proud of our adviser toolkit, and it’s evolving all the time.”

Wilson says much of this has been driven by the impending consumer duty regulations, which will come to fruition this year. It’s a time, he says, of change and opportunity.

“Consumer duty is probably the biggest change in financial services for around 20 years,” he emphasises. “This is a fundamental change that will affect every single adviser, no matter in which market they operate. It’s 95 per cent common sense, so it’s not actually that scary. It’s not a mountain to climb, it’s a hill.

“It’s just about better recordkeeping, a better audit trail, better transparency – all of those things to one degree or another that advisers are already doing. We’ve just got to get it to a standardised level. So don’t be scared of it, but accept that it is important, and it will necessitate review and change for everybody. Once again Air will be at the forefront of providing the latest information and resources to help advisers navigate the upcoming changes.”

There’s no hesitation from Wilson when asked about the best business lesson he’s learned during his career.

“Listen twice as much as you speak,” he says. “When I was advising customers, I learned about people. Once you understood their stories, you built trust a lot quicker. And when you’re working in management with staff, the same rule applies – listen to your staff, understand your staff. I’m very proud of the fact that my team have been hugely stable. Many of them have been with me right the way through the journey, and that compounds good service.”

Now in his mid-fifties, Wilson doesn’t focus on what his own later life might bring, other than planning to split his time between Portugal and the highlands of Scotland. “I tend not to dwell too much on that; I tend to live in the moment,” he says. “I am a workaholic, as my wife would tell you – 70 to 80 hours a week.

“But one thing I would say is that I know that when I’m 65 or 70, If I need advice, there are some very good, morally driven, caring advisers out there.”

He concludes, “Looking forward, Air will continue to live and breathe later life lending, the same as when it started in 2007.”

A TIME OF CHANGE AND OPPORTUNITY

The UK has an ageing population, so it should perhaps come as no surprise that the value of the later life lending market is huge.

Life expectancy has increased in the UK over the last 40 years, albeit at a slower pace over the past decade, in part due to the pandemic.

According to the Office for National Statistics, from 2018 to 2020, the most common age of death for males was 86.7 years and 89.3 years for females, and many of us are choosing to live our latter years to the max, in a way that our ancestors could barely imagine.

The later life lending market was recently estimated to be worth £153.9bn, and – given that it’s a market that is generally regarded as being underexploited – its sheer potential is extraordinary.

Research from AKG Financial Analytics, in collaboration with Key Group, a leading later life lending services group, found that in 2021 alone, £54.9bn worth of new lending and product switching occurred.

So, for those working in the sector, the coming years could be a richly rewarding time to be involved in later life lending.

To gain a better understanding of the market currently and the challenges it faces, Mortgage Introducer, in association with Air, the later life lending platform, brought together five highly knowledgeable industry professionals for a discussion.

The five were Stuart Wilson, chairman, Air Club; Fran Green, national sales & networks manager, more2life; Paul Saroya, director, Viva Retirement Solutions; Sanjay Gadhia, national sales manager, Standard Life Home Finance; and Desmond O’Hara, adviser development manager, Access Equity Release.

Firstly, the panel considered what distinguished later life lending from other areas of financial services.

“In a word, passion – passion from the advising community,” said Stuart Wilson. “I’ve operated in pensions and distribution of all financial products over the 33 years that I’ve been in financial services, and I’ve never seen passion to the level that I see it from advisers in this community and in engagement from the consumers. This, in addition to good service, are the two things to me that stand out as USPs.”

With people in the UK living longer and looking to enjoy their lives to the full, the later life lending market is in a prime position to enjoy growth over the next decade. Simon Meadows reports on our latest round table discussion

“This is an underserved sector that’s going to have an increasing demand. And advisers will be very busy, once this current economic set of challenges and changes is out of the way”

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STUART WILSON

Paul Saroya, from Viva Retirement Solutions, a team of advisers operating later life lending services to over-55s, said of the market, “It’s not just there for the rich, or the very poor. It’s for everyone out there who owns a property. It’s giving something tangible back to the client – their money now to do something with. It’s about giving people the opportunity to fulfil their dreams, more than any other part of the market, I think. The clients our advisers go to see are really our parents and our grandparents in different guises. So it’s very relatable.”

Desmond O’Hara, from Access Equity Release, a specialist in equity release advice, was clear that later life lending was misunderstood.

“Our challenge, really, is to get out there and educate people,” he explained. “There are not many products where you have got a two-stage safety net, where you must get advice and you must see an independent solicitor. There’s no other product out there that gives you those kinds of safeguards. And I think our challenge as an industry, as a sector, is to get that across to the public – that this is one of the safest financial services products out there.”

Representing Standard Life Home Finance, which supports advisers and their clients with lending solutions for later life financial planning, Sanjay Gadhia remarked, “For the over-55s, the demographic we deal with, it’s a financial solution that they may not even know they have access to. Being able to liquefy your bricks and mortar to give you the finances to support yourself in your needs and aspirations – that’s something that we offer, and that’s what I believe marks us out from the rest of the industry.”

He confided, “Years ago, when I was in sales in financial services, I didn’t believe in the product – but chatting with my neighbour about equity release, he said, ‘We took a plan three months ago.’ To see my neighbour actually obtain a lifetime mortgage and to see him do up his garden and his bathroom and to see him maintain his way of living, it brought it to life.”

There was agreement from Fran Green, whose employer, more2life, is one of the largest lifetimemortgage lenders in the UK.

“It’s so satisfying when we can offer transformative solutions to people’s real-life challenges,” she confirmed, “an ability to stay in your home, an ability to receive care in the home, when moving into a

care home frightens the life out of you, especially post-pandemic.

“A colleague had advised a customer who was absolutely determined that they didn’t want equity release. They didn’t know why, but they’d heard it was a bad thing. However, they followed my colleague’s recommendation that this was the most suitable option. The adviser phoned back to check in with the customer, who burst into tears and said, ‘You have changed my life.’ The peace of mind it had given them, the ability to have a quality of life that they didn’t have before – it is incredibly satisfying for advisers, and people like myself.”

Few in the industry would claim that the last year was easy, with some notable financial turbulence dominating the end of 2022. But how did our panellists view later life lending in 2023, a year that will see the introduction of consumer duty?

“It’s challenging – it would be remiss to pretend otherwise, because it’s changing – but I think this comes down to individuality,” declared Wilson. “You can either take a challenge as an opportunity or you can pack your bags up and walk away and find something easier to do. But in financial services right now, nothing’s easy.

“I’ve always said I’d rather work in a challenging market because it creates bucketloads of opportunities. Everything changes, the norm is no longer. Yesterday’s business is not tomorrow’s business. So I think for firms and advisers who might be feeling a little bit bewildered since the mini budget, if you just refocus and retrench and look at the opportunities that will open up this year, I think it’s going to be quite different.”

He elaborated, “I think what we are going to see are smaller loan sizes. But underpinning that, for the first time in two or three years, I believe we’ll see →

“The people our advisers go to see are really our parents and our grandparents in different guises. So it’s very relatable” - PAUL SAROYA

It’s how we live and breathe your success. The platform for later life lending professionals

a real growth in the numbers of customers. I think the Bank of Mum and Dad will never be more important than in the next 12 months, with the world economic situation, the recession, and inflation that’s going to stubbornly hang around for quite a period of time. Consumer need is going to increase.”

O’Hara agreed that the tightening up of affordability testing in residential lending would drive new opportunities within the later life market. “I think in that respect, the market will definitely grow,” he stated. “It will become an awful lot tougher, I believe, and I think we’re probably going to have to work an awful lot smarter, but I think it will grow.”

Gadhia added, “We’re going to face more challenges now. I concur with lower loan values – we’re expecting that. But I believe customers will need this solution, not just necessarily to support themselves, but their children. I firmly believe there is going to be a customer profile that will continually support this industry, and that profile is going to increase this year.”

A demanding year was also anticipated by Green. “Loan to value is the biggest challenge that we have got at the moment,” she said. She thought they would see more enquiries from “those people who need those higher releases, who just can’t achieve them with the current lender appetite. What we’ve been seeing, even prior to the quarter four meltdown in the economy, is that lending is becoming more and more needs-based and less and less about discretionary spending.

“I do think we will be needed more than ever, as an industry, to help give people some real, life-changing solutions, especially with interest rates now being higher, and the need to service interest probably greater. Later life advice specialists are never going to be in more demand, and it’s growing exponentially.”

Saroya acknowledged it had been a really challenging market since the government’s mini budget.

“We’ve reverted back 10 years in terms of the interest rates, which is a million miles from what they were 18 months ago,” he observed. “We need to carry on educating, but a lot of education has worked, with mortgage brokers, too. People are much happier to say that they’ve actually taken a type of equity release, and speak to friends and relatives about it. Whereas in the past, not only was the market underexploited, people who took these plans out were not really shouting from the rooftops about it. It’s definitely becoming much more mainstream.”

Wilson said, “If we cast our minds back only seven, eight years, we saw huge numbers of cases that were torpedoed below the waterline by ill-informed, ill-educated solicitors and family members, with possibly the addition of self-centred interests. In other words, they were acting in their own inheritance interests, and that’s why they were trying to get cases stopped. I think because of the education that the Equity Release Council has done and the work that the whole sector has done, this is no longer the case. Part of that is motivated, first, by awareness, but I think society has changed as well.”

So, given that the panel had come to a consensus that the later life lending market faced challenges, but also opportunities for growth, what did it think brokers and lenders could do to maximise business?

“I think the biggest thing I’d say is don’t be a one-trick pony,” Saroya urged. “Look at doing other products like conventional mortgages or RIO [retirement interest-only] mortgages. I think, also, look at ancillary products, such as wills and powers of attorney. It’s really important to do the whole job for that particular client you’re helping and for you to market to the right people, especially as needs-based requirements are becoming more prevalent. And I think, from a broker’s point of view for lenders, what we’d love to see is eligibility being more like the conventional mortgage market – so, not as strict, LTVs to be a bit higher, and for the competitiveness to come back into the market.”

Green agreed that the market had changed, so it was important to try different approaches.

“Lots of us have lead-generator workshops that advisers can tap into,” she said. “One of the things I promote is, don’t be an equity release adviser or a later life lending adviser, become a later life specialist

Cutting edge digital sourcing tools AND rewarding your performance?

“It’s so satisfying when we can offer transformative solutions to people’s real challenges; an ability to stay in your home, an ability to receive care in the home” - FRAN GREEN

– so that could be anything that’s relevant to that older customer, even if it’s not in your wheelhouse to do it. Partnerships are a great source of referrals. One of the things I talk about a lot in this business is to make sure you have a referral friend in everything you do. Having that broader customer footprint with that bigger product set, even if you don’t do it yourself, will help you attract more business.”

For Gadhia, the key was also to go the extra mile. “The average loan size is going to be lower now,” he said. “So if firms require certain limits to be hit this year, then that’s added work that needs to be put in, along with the continuing education. Working smarter, absolutely. I think that starts with everyone, from trade bodies that work alongside the industry, to us who work in it day in, day out.”

O’Hara wanted to reframe the question, considering instead how he and his colleagues could consolidate their positions in the market, rather than maximise business.

“I’ve not heard of a lot of people talking about massive growth this year, I’ve got to be honest with you,” he shared. “I think all of us – brokers, lenders, everyone – just need to get back to basics. I see this year is as a year of consolidation, re-education, and getting ourselves ready for the years ahead. I think we’ve got to view ourselves more as hubs and portals. If I can’t do something in the residential market and I have not got the qualification to do something in the pension market, I’ve got a good, trustworthy source of referring over, and I receive reciprocal business.

“We need to get back to really caring about these clients – the smaller case sizes, the real nitty gritty and the meat on the bone of what we’re in this industry to do. Everyone’s going to have smaller case sizes, so I think if we can equip ourselves and get back to basics, then, when things do start to pick up once the financial and economic situation improves, at least we’ll be in a better position.”

Language and communication were key considerations for Wilson.

“If we talk to customers about mortgages, then fundamentally we’re talking the language that this generation grew up with,” he reasoned. “The 1960s saw the first credit cards released; this generation is the first big homeowning generation. Most of them funded the ownership of their homes with mortgages. They understand mortgages, so as a sector, we need to talk about

mortgages. Equity release is misunderstood – it’s still tarnished with a tag from the 1980s. As soon as you put equity release into the conversation, you put a steel shutter up that’s really 99 per cent about misunderstanding and fear, and then, when you break it down, you’re 45 minutes into the conversation.

“We need to be better at communicating the benefits and not the technical product features, and that would have a massive impact on how this sector engages with consumers. So we have got to get that language right. We’re entering consumer duty territory in July this year, and, actually, one of the core component parts of that is to use language and reports that consumers can actually understand and that we can confidently say that they’ve understood. It’s a perfect environment to talk in a way that customers understand from the beginning.”

Next, our panel turned its attention to the relationship between brokers and lenders. To what extent did they think a good working relationship between the two enhanced the market?

“I think it’s critical,” asserted Green. “The best advice I give to any advisers is to engage. There are things that we can do by working together. We really need to be in partnerships to help get these cases smoothly through to completion. I think everybody will agree that the process of separate representation that we have in this marketplace causes challenges, but if the brokers work closely with the lender contacts that they’ve got, and vice versa, we can head off any of those known, repeated problems that can occur in a transaction.

“We have a requirement within this industry for the customer to have independent legal advice – absolutely right. But how it’s delivered is →

“For the over-55s, the demographic we deal with, it’s a financial solution that they may not even know they have”

- SANJAY GADHIA

It’s how we live and breathe your success. The platform for later life lending professionals

very different from how it’s delivered in the standard mortgage market. I’ve always had a strong belief that if we can move away from separate representation, closer to the standard mortgage market, that would solve a lot of problems.”

This struck a chord with Wilson, who chipped in, “I’m not making a judgement whether or not we should go to separate legal representation for all older customers, or they should all go down to one legal representative for both. That’s to be discussed and debated. But I do think it’s obscene that we’ve got customers who have a completely different journey, driven by the product and not the advice outcome.”

Gadhia, meanwhile, reflected on the familiarity within the sector. “We are an industry where we all tend to know one another,” he said. “I think it’s just ensuring that there is a relationship among adviser, firm, and lender. And let’s branch out to the solicitors as well, so, just ensuring that there is a good working relationship across all parties involved in the transaction.”

The importance of business development managers in the process was key to O’Hara, who advised his colleagues to be nice to them!

“It’s a thing we give out to our advisers,” he said. “I think from a broker point of view, we should engage and nurture our BDM colleagues sometimes a bit better – the old-fashioned stuff of taking people out for a cup of coffee or taking them out for a meal, maybe not to talk about business. Find out about them, and reciprocally they can find out about you. If you’ve not got a good working relationship, you are in a world of pain in our industry, because everybody knows everybody.”

Saroya concurred, adding, “The glue really between the broker and the lender is of course the BDMs, who have an influence, I think, on brokers. My advice to brokers is to treat the lenders’ BDMs

with the long term in mind. If you’re throwing your toys out of the pram because you’ve got an issue on one case or another case, that’s very short-term – they’ll have a negative opinion of that.

“The adviser’s role has changed, I think. Once upon a time, you could just put an application in and that would be your job done. But these days, you have to see it through to the end. If the lenders are more prepared for the advisers to begin with the end in mind, which is the client getting their money and being happy with that timeframe, then I think that’s where the collaborations could get a lot stronger.”

Wilson was keen to fix those parts of the industry that weren’t working, to ultimately benefit its processes and the relationships within them.

“As a sector, we’ve got to have some frank, open, honest discussions about the bits that are being broken,” he emphasised. “There’s a discussion that I know is ongoing currently, around the lenders’ solicitors and what they’re paid, how they’re remunerated, and what service they’re expected to deliver. The time between an application and a completion is getting longer and longer and longer, and that needs addressing in the world that we live in now.

“So we need to look at the broken bits and mend them, and then, wrapped into all of those, we’ve got to get with the programme on technology. I was doing things in residential mortgage broking, technology-wise, 20 years ago that we still can’t do in the equity release and later life lending sector.”

He added, “I know a lot of it is driven by scale, and it’s a big ask from investors to invest what is needed, but sometimes you’ve got to take a leap of faith. Maybe now is that time to bite the bullet, to make the investment, to build the technology platform bigger, better, stronger, and deeper, and that in itself will make this relationship between manufacturer and distributor a lot, lot tighter.”

As the discussion began drawing to a close, our panel was asked to give its expert opinion on how the market might evolve in the future.

O’Hara began by saying, “Taking debt into later life, into retirement, is far more a norm these days, in comparison to maybe the generation before, when it was an absolute no-no. How the market is going to evolve is by collectively getting that message out there that equity release is a real solution that offers a variety of accessible products.

Personalised marketing support AND Consumer Duty considered?

“I think our challenge as an industry, as a sector, is to get that across to the public – that it is one of the safest financial services products out there”

- DESMOND O’HARA

“It needs to start with making incremental gains –discussion groups like this, local networking events, and our communities – getting the message out there that later life lending is becoming increasingly more mainstream. From 2025 onwards, I think we’re going to have a lot of growth, I really do.”

There was a note of caution from Saroya, though, about ambitions for the sector.

“Before we get bigger, I would really love to see us getting better at what we do,” he advised. “The journey from application to completion – I’d love that to be more streamlined and a quicker process. I see the market being much more accepted as mainstream as we go forward, and with the steadying of interest rates, bringing us to a new norm within the market. What’s really important, I think, will be the evolving of the product innovation. So, for example, there is a gap between a conventional mortgage, before you even step into the realms of a lifetime mortgage.… Therefore, I’d like to see the gap narrow and possibly an introduction of hybrid products. I think that could be a really good way forward.”

Green was keen – for evolution.

“Customers need change, and the products will need to evolve,” she agreed. “For people who want an equity release, but haven’t either got the circumstance or equity to do so, a true hybrid would be a great addition to the market. Whereas in the past equity release was pretty much a oneand-done, people are living longer and looking for options to review their plan. So I’d like to see that part of the post-completion journey be invested in, in order to improve it for everybody.”

Industry improvements were on Gadhia’s mind, too. “If we are deemed to be in some form of consolidation scenario right now, let’s use that to streamline things,” he ventured. “I’m in full agreement with embracing technology. Let’s get better at what we’re doing right now. There are definite gaps in the market when you look at what the council is offering end-consumers already, with a no negative equity guarantee; the mandatory requirements for lenders to ensure that clients can make some form of overpayment; and then some of the modern lending features that lenders offer. The market is kind of shifting from more of a gilt-based ERC model to fixed – perhaps that supports the attitude to risk for the end consumer.

“I am of the firm belief that there is a gap between moving away from a “Resi,” where the RIO may not be the best solution, to something hybrid between RIO and a lifetime mortgage. That’s what I would love to see – and perhaps something with an income plan as well, given where we are right now. So, yes, I’m excited. Let’s see what this industry comes up with.”

As he helped wrap up the discussion, Wilson had modest expectations for 2023.

“This year, I don’t think the lending volumes will go over the six billion mark again,” he said. “But I actually think the number of new customers might well be the positive that we take away on the 31st of December. They’ll be borrowing less, but numbers of new customers and enquiries, I think, will certainly rise in the second half of the year, if not the first.

“It’s that tipping point. I can remember 20-odd years ago when buy-to-let tipped. One minute it was a niche product with a niche number of lenders, sold by a niche number of specialist advisers. And then, in the space of 18 months, two years, it became a mainstream product offered by virtually every lender, sold by virtually every mortgage broker. The consumer education and the understanding are vast. That’s where this sector will go.”

He continued, “As the market grows, we’re going to see more innovation. Tomorrow’s process is automated, where advisers can literally, using biometrics, take immediate proof of identity using cameras and biometric technology, and then instant credit searches, and comparison tools of all potential products. The absolute irony is that all of that is not tomorrow’s technology, that’s all here today.

“We, as a sector, just need to understand that our consumer base is still learning technology and, actually, that also applies to the advising community. Air’s later life lending platform understands that technology alone is not going to work because the average age of advisers is still in their late 50s, early 60s. Therefore, all these component parts are going to build us a very exciting, very vibrant sector, and I can see within three years this sector will break £10bn a year in lifetime mortgages.”

Wilson concluded, “This is an underserved sector that’s going to have an increasing demand. And advisers will be very busy, once this current economic set of challenges and changes is out of the way. So there are great pastures in front of us, and it’s exciting.”

It’s how we live and breathe your success. The platform for later life lending professionals

The Bank of Mum & Dad

Kay Westgarth sales director, Standard Life Home Finance

An increasing number of parents are supporting their adult children, whether able to afford it or not, as the cost-of-living crisis piles pressure on the Bank of Mum and Dad.

More than a third (36 per cent) of parents are already helping their grown-up children with their finances, according to recent research.1 And that’s expected to grow.

With prices expected to continue to rise, a further 15 per cent of parents who don’t currently provide any financial support to their adult children expect to do so due to the cost-of-living crisis.1

WHERE IS THE FOCUS OF THE SUPPORT?

Over the next two years, nearly a third of parents (31 per cent) say they’ll provide financial support for their grandchild’s childcare, while over a fifth (21 per cent) say they’ll cover bills and other household expenses –an average of £870 each.1

Nearly one in 10 (eight per cent) say they’ll help with a house deposit, and almost one in 20 (four per cent) will contribute to paying off debts.1

WHY IS THE SUPPORT NEEDED?

Inflation is currently at its highest rate for 40 years. Soaring energy, food, and fuel costs have added significant financial strain to many UK households, particularly young adult households with typically lower incomes.

Add to that a sharp rise in mortgage and credit card interest rates – the average five-year fixedrate mortgage was £501 more expensive in September 2022

than two years prior on a 25-year, £250,000 mortgage2&3 – and it’s clear why so many are struggling.

Of those who are providing financial support to their children, over half (51 per cent) say their grown-up children wouldn’t be able to meet payments or afford these expenses without their help.1

HOW WILL THIS SUPPORT BE FUNDED?

More than half (55 per cent) of parents who already financially support their adult children, or plan to amid the cost-of-living crisis, admit it’ll be difficult to do so; 31 per cent say they can’t afford it, but will do it anyway. 1

That then poses the question: How will parents fund this financial support?

According to research, almost twothirds (61 per cent) will cut back on their own spending, while 38 per cent will forgo luxuries.

Concerningly, though, around one in 10 will rely on credit cards (nine per cent) or go into overdrafts (eight per cent) to help their grown-up children.1

Overreliance on credit cards has never been a good thing, but with average interest rates rising to 21.88 per cent in September, borrowing costs are at levels not seen since November 1998.4

Similarly, overdraft interest rates can often be around 40 per cent,5 meaning using this feature, however tempting, could be significantly costly and increase pressure on already-stretched budgets.

USING EQUITY RELEASE AS AN ALTERNATIVE

In cases in which an adviser agrees it best meets the needs of the client, equity release can be a solution for customers, One way to help boost finances in later life is a lifetime mortgage – the most popular form of equity release.

Through a lifetime mortgage, your

clients could unlock some of their property’s value, tax-free, and use either a portion or all of that money to support their loved ones.

In fact, the latest data from Key Group’s Q3 2022 Market Monitor shows that one in five people who took out equity release in July through September 2022 did so to provide a financial gift.

That includes bequeathing an early inheritance, topping up a deposit to help a loved one with a property purchase, and helping to repay debts.

If it is expected to offer a desirable outcome for your clients, a Standard Life Home Finance lifetime mortgage will require zero monthly repayments. That means if your clients have already been affected by the current economic climate, they needn’t worry about the additional financial pressure of monthly repayments.

Other benefits include fixed interest rates for life, so your clients are protected against any future market volatility; full home ownership retention; and modern, flexible features such as partial capital repayments, should your client wish to reduce the total cost of borrowing in the future.

And thanks to our no negative equity guarantee, which is included in all our plans, no matter what happens to house prices in the future, your clients will never owe more than their home’s value or pass on any equity release-related debt to their loved ones.

To help your clients enjoy a life full of possibilities, explore our Defaqto 5-Star-rated Horizon lifetime mortgages today.

A CRITICAL RESOURCE

“What I want to see is a coherent approach to later life,” says Jim Boyd, CEO of the Equity Release Council. “I think that really has to come from the top, but it does require everybody to come on the journey and be focused on our ageing consumer.

“In 2050, one in four people [in the UK] is going to be over the age of 65. Estimates suggest that 44 per cent of women are going to be living by themselves after the age of 60. That transforms our society, on every level. It’s thought that one in two people will retire with an unpaid mortgage and that one in three people will come into retirement with debts of tens of thousands of pounds.”

Just over four-and-a-half years ago, Boyd took up his position leading the Equity Release Council, the representative body for the sector. It lobbies to raise awareness of equity release, while aiming to set high standards of conduct and practice for the trusted provision of advice and products.

“People are living longer lives with inadequate pension savings, and we’re expecting people to somehow navigate 30 years, maybe more, where they are going to need care and have all sorts of other needs,” he says. “We are looking at one of the most catastrophic times, I think, for people in later life, yet there’s about £5.4tr worth of housing wealth in Britain.

“We know that 23 per cent of all housing in Britain

is mortgaged, leaving 77 per cent non-mortgaged, which means people in later life are more likely to be owning a lot of non-mortgaged equity.”

The council is a thought leader on how housing wealth can address financial challenges, seeking to dispel myths about equity release and educate the public about the potential to access the capital in their homes for a variety of uses. Since 1991, 610,000 homeowners have accessed £42bn of housing wealth via council members to support their finances. Over Boyd’s tenure, the number of corporate members has risen to around 750. Its individual membership is circa 1,850.

“It just shows that appetite and that hunger on the part of advisers to really understand and want to know more about this,” he suggests. “The modern equity release market is transformed compared to where it came from. It’s got great controls and standards, and it really does work for a consumer need. But it’s just part of the broader later life lattice or later life market. And we do need a consistent overview, and we need the industry to work together to be really pushing those standards.

“We have to seize this now and work together, every part of this critical stakeholder chain, to evolve and innovate new products. We have to have new later life products, not just retirement interest-only mortgages or later, lifetime mortgages or even just conventional mortgages.”

Boyd adds, “If we look at massive societal issues like

A cost-of-living crisis and soaring interest rates may make many among our older population anxious about 2023. Unlocking property wealth could help ease the challenges, as Jim Boyd, CEO of the Equity Release Council, tells Simon Meadows

how we fund care, how we make up for that shortfall, how we service debt, then actually property wealth has a key role and is a critical resource. So the real question is, why are people not looking at their property as a source of income for later in life? How people access this is really the issue.

“I think there are a number of barriers, a large part being perception, with this lingering reputational overhang for equity release from the 1980s, and the fact that there are relatively few advisers. When I first arrived, in June 2018, there was £3.3bn worth of equity release and it went up to just below £4bn. But then, for the next three years, it stayed roughly at that level because there were systemic shocks – a combination of Brexit, the Johnson/Corbyn election, and obviously we had lockdown. And then last year, it picked up to £4.8bn, which was a 24 per cent increase. The potential for the market is enormous.”

Boyd believes that education around equity release is key. The council plays its role in this, providing webinars and technical regulatory bulletins, focussing on subject matter such as vulnerability.

“I’d like to see the government engaging with industry to provide a compelling narrative that retirement isn’t just pensions,” he says. “It’s in the government’s best interest that people not let this money just rot away in a house, when it could be liberated. And we have to work more with the pension service, to get better guidance.

“The real risk is people have an inconsistent approach to this, so we have to train them up. I’m not calling for everyone to become a multi-whiz, holistic adviser – what I’m looking for is better upskilling, better awareness, better referral pathways. There are so many huge opportunities here that we’ve got to get it right first time, and it’s got to be a safe market, and standards and protections are the critical underpinning.”

A former tax and trusts lawyer, Boyd has 20 years’ experience as a later life specialist in financial services and other regulated industries. It’s clear he’s passionate about his subject.

“I think we should be looking at everyone as being vulnerable in this particular space,” Boyd offers. “In terms of the impact on low incomes, I think we’re going to be finding significant segments of people in later life suffering from hardship. Obviously, we haven’t seen the beginnings of what’s going to happen as a result of this particular period, with the headwinds created by the mini budget and obviously the interest rates.

“Everybody looks at equity release as a product that is aspirational, because it meets a whole series of needs and lifestyle aspects, such as people going on holidays and redoing their houses, which are

important to them. But I think what we’ll see is that people are going to be using this sort of product for different purposes. I think we’ll see a lot of people paying off mortgages and consolidating debt, or supporting children or grandchildren, to help them onto the housing ladder, or to pay off their university debt, for example.

“A report from Legal & General showed that for every one pound taken out by equity release, two pounds cascaded into society. This gave rise to 45,000 jobs directly from equity release, 15,000 in health and care.”

As he looks forward to the year ahead, Boyd welcomes the new consumer duty regulations, which come into force over a phased rollout in 2023 and 2024.

“I think it’s really important,” he affirms. “We have always demanded our members go above and beyond formal regulation, to look at good consumer outcomes. It’s going to force people to look long and hard at their processes, their fees, and their charges. In effect, it’s changing the entire culture of the financial services industry, which I think is fantastic. It’s positive, it’s constructive. It’s the next stage in the evolution of our sector.”

“We are looking at one of the most catastrophic times, I think, for people in later life, yet there’s about £4.5tr worth of housing wealth in Britain”

Jim Boyd

Market review

WHAT GOES UP...

In my last market overview, I touched on the range of inflationary pressures that were already building in the UK economy and influencing rates across the borrowing spectrum, including later life lending.

Money supply issues, worldwide supply-chain problems, the cost-of-living crisis, and negative market sentiment toward the spiralling UK government borrowing bill have all affected the longterm gilt rates that influence the interest rates charged by lenders.

According to data from Key Group, average interest rates rose from around 5.5 per cent in the middle of August to a peak of 8.29 per cent just two months later as product options were removed and “max cash” LTVs were either scaled back or priced up significantly.

...MUST COME DOWN?

So, with gilt rates having diminished from their peak in recent weeks, will lifetimemortgage interest rates quickly follow?

Although gilt rates certainly influence lifetime-mortgage rates, they are not the only factor that funders and lenders will take into account – so a rise (or fall) of one per cent in gilt rates does not mean a corresponding change in interest rates. Indeed, although gilt rates began rising (see chart below) from November 2021 onwards, when we had reached historic lows in terms of interest rates in this market of around 2.3 per cent, we did not see a significant increase in the overall average interest rate in this market until late September.

Lenders will also be taking into account where rates are likely to be once the case completes, which may be two to three months from application. So future positive or negative changes in rates being predicted by the market will be priced-in to today’s rates in order for lenders to take account of future movements.

consumers, and certainly no sign of a drop in demand for lending from later life clients who want to get on with life, albeit in more challenging economic circumstances.

As a prominent lender in this market, more2life has been focused on working with its range of funders to deliver fair and competitive rates for advisers and their clients. Although some product options have had to be paused for the time being, we have reacted quickly to the rapidly changing macroeconomic conditions and maintained a broad range of options, from the lowest rates on the market – at the time of writing, just 6.15 per cent MER – to the highest LTVs available, including the reintroduction of our market-leading Apex product.

During periods of volatility such as we have seen in the past few months, there is an increased cost of hedging, which will also be reflected in the interest rate charged; as well, the spread on all “risk assets” compared to “risk-free” (gilts) has also widened during this period. Lenders will also be considering the increased value of the no negative equity guarantee to customers in a market where rates are increasing and the outlook for house-price growth is uncertain.

WHAT DOES THIS MEAN FOR LIFETIME MORTGAGE RATES?

Although in the short term, for all the reasons mentioned above, we are unlikely to see significant equity release price reductions, there is still a range of great options for

This has been matched by our commitments to pushing the boundaries of product innovation and modern lending features to ensure clients have the flexibility to react to changing circumstances later in retirement, such as our introduction of the market’s shortest fixed ERC period of just five years.

We will wait to see if the market comes with us, but consumer needs are changing, and borrowing demands are likely to continue evolving as we move through this current cost-of-living crisis and back toward something resembling a “normal” market rate environment. Later life consumers in the UK have never been in greater need of the expert advice and specialist knowledge of our industry’s advisers, and we are determined to continue supporting advisers on their mission to deliver better financial outcomes.

With the market turmoil caused by the mini budget in September leading to higher interest rates on later life mortgages, the obvious next question is: When will rates start going down?

According to data from Key Group, average interest rates rose from around 5.5% in the middle of August to a peak of 8.29% just two months later

Roland Steere director of funding, more2life

Technology that lives and breathes your success

… stay ahead of the later life lending market with Air.

In a rapidly changing later life lending market, standing still is not an option. That’s why Air moves your business forward with best-in-class real-time digital sourcing tools, personal development services, incentives and reward programmes. As the number one platform for later life lending professionals Air has all you need to connect, promote, learn, monitor and manage your activities.

And because that cutting edge technology is supported by expert, peer-led support and advice, you’ll have a far more rewarding later life experience with Air.

The platform for later life lending professionals