Later life review

Demand for later-life lending in the spotlight

Shaun Almond

MD, HLPartnership

Later-life lending is playing an increasingly important part in the calculations of many people who are planning their retirement or are already retired and are looking to ensure their standard of living into the future. Cost of living rises are affecting everybody, but for those whose incomes are fixed or are going to be fixed in retirement, the issue will cause more older homeowners to consider later-life lending as a way to shore up their finances.

But is the sector well served, with enough advisers who are fully up to speed with all the pros and cons of later-life lending? There are no precise numbers, but clearly, as people are living longer and the cost of living shows no sign of peaking, the demand for advice can only increase. According to UK Finance, in 2021 187,120 new mortgages were granted to borrowers over 55 years of age, with total lending in the year of £28.1bn. This represents an 11 per cent increase in mortgage volumes over the previous year and a 22 per cent increase in the value of lending.

Interestingly, the actual market for those specifically wishing to release equity from their property is relatively small in comparison to the total volume of lending to those over the age of 55. Lifetime mortgages (LTMs) in Q4 2021 were recorded at 10,860.

Fast forward to this year: between April and June, 12,485 new equity release plans had been taken out, which means that just over 200 customers chose equity release every working day to help manage their finances in that period, representing the withdrawal of £1.6bn in property wealth, according to the latest figures from the Equity Release Council.

In 2022 the opportunities for homeowners to raise capital have been made easier by record house prices, even though interest rates are going up. At the same time, retirees and those close to retirement are recognising that the costof-living crunch can be offset by making use of the equity built up in their homes.

Lifetime mortgages hold out what seems to be a magic pill for the issues of funding old age, and do represent a valuable option for those seeking to improve their financial position in later life. Also, it is increasingly apparent that matching customers to the best options for older clients must include LTMs because releasing equity through such a product has plenty of attractions. It is not suitable for everyone, however, as individual circumstances vary widely among cases and advisers. Even those with years of lending experience must be particularly well trained to assess and advise properly. At HLP, member firms with qualified later-life lending advisers are supported by training and logistical support and are free to offer advice directly. However, other HLP members who come across lifetime mortgage enquiries in their everyday mortgage business must refer them to our specially selected panel of LLL-qualified HLP advisers.

We believe that with any surge in enquiries, there is a danger that, unless advisers are well trained and versed in all aspects of later-life lending, the wrong advice could unwittingly be given. This is too serious to get wrong, and while advice might be accepted at the time, especially if there is an immediate need to stabilise finances, retrospective file-checking in response to a complaint years down the line could prove to be expensive financially and professionally.

CONSUMER DUTY

The industry is facing a further revolution with the FCA’s announcement that it is indeed implementing the long-trailed Consumer Duty, although it has agreed to delay extend the start date by an extra three months to give brokers more time to prepare. D-Day is now 31 July 2023.

Being ready for its implementation is going to take a lot of preparation, and firms will have to divert resources and money to ensure compliance. I would recommend that all firms take advantage of every opportunity to talk to compliance professionals and attend the many free seminars that will be available. Don’t underestimate the changes that Consumer Duty will bring. M I

https://www.fca.org.uk/news/pressreleases/fca-consumer-duty-major-shiftfinancial-services