How big is the UK's later life lending market today?

Study also identifies crucial next steps for continued market growth

How big is the UK's later life lending market today?

The UK’s fast-growing later life lending market is now worth up to £153.9 billion, new research has found.

Sponsored by and produced in collaboration with Key Group, the AKG Financial Analytics research has also estimated that £54.9 billion worth of new lending and product switching took place in 2021 alone.

It also showed that over-55s have mortgage borrowing – standard, RIO and equity release - of around £99 billion while annual new lending across all products is worth up to £14.9 billion and product switching valued at a further £40 billion a year.

More than half (51%) of advisers have seen an increase in demand for advice on later life lending in the past year and 58% expect a rise in demand over the next 12 months.

Read more: Consumer confidence has returned to equity release – executive.

The study found demand is expected to continue to build – 77% expect a rise in the next two to five years and 79% in the next six to 10 years with 30% banking on a substantial increase.

Advisers surveyed estimated that, on average, nearly a third (30%) of their customers aged 55-plus had outstanding mortgage debt with a quarter (25%) also having other debts.

This view is further supported by consumer research which found that 14% expected to repay their mortgages between the ages of 65 and 70, while around one in 10 (9%) did not know when they would clear property debt.

Around a third (35%) welcomed the ability to borrow in later life.

Read more: When is equity release the right option for borrowers?

Overall, when asked about their confidence in achieving a comfortable retirement, only 11% of consumers said they felt they were financially prepared for that stage of their lives. 

Instead, 21% said they were quite well financially prepared, but cautious about bills. At the other end of the spectrum, 22% didn’t think they were financially well prepared and were concerned about this.

With the research highlighting general sentiment that the need to borrow into retirement will continue to grow, it also identified areas that needed further development if an optimum consumer outcome is to be delivered. Those areas includes greater consumer education on if, when and how, property will play a role in their retirement planning; properly integrating the discussion on property wealth into retirement or decumulation processes; and bridging the advice gap between standard mortgage and specialist later life lending advice.

Also important are considering how the market will provide the ongoing training, qualifications and regulatory oversight required to support an increasing number of advisers looking to offer more holistic solutions; encouraging trusted sources of guidance and support such as Citizens Advice and the Money and Pensions Service to develop their holistic later life lending; and further product development based on research and customer data and knowledge.

For the first time, the UK’s later life lending market has also been defined and outlined as part of the “Future of Later Life Lending - Targeting Responsible Market Growth” research paper. 

AKG defines the market as “standard, retirement interest-only or equity release mortgages for borrowers over the age of 55 with terms that extend into, or start during, retirement.”

“The in-depth research paper clearly highlights that not only is the later life lending market becoming a force to be reckoned with, but that customers, advisers, providers and trade bodies are keen to see it take its rightful place amongst the options people consider as they age,” Simon Thompson, group chief executive at Key Group, said.

“By clearly defining the market, AKG has provided a platform on which people and businesses can make concrete future plans.”

Read more: Equity release choice nearly triples in one year.

Matt Ward, communications director at AKG, said that while they were pleased to have been in a position to unveil an assessment of the size of later life lending in the UK, it had not been without its challenges.

“To achieve this, we have sought to estimate the full extent of the whole later life lending market through a combination of the established quantified component parts,” he said. “However, this lack of consistency around a later life lending definition and definitive data sources has highlighted the challenges faced, not only by businesses keen to engage, but consumers looking to access their housing equity.”

Ward added that the industry needs to focus on further tightening this understanding, through better coordination of the data and participant agreement on the market’s component parts.

“Such an ongoing revisionist exercise is of benefit to advisers and their clients in what is a large, important, and evolving market, which will be at the heart of delivering positive customer outcomes in retirement and later life,” he continued. 

“As an industry, we need to step up to ensure that people can make their choices with confidence – comfortable in the knowledge that they are getting the best advice, products and support for their individual circumstances,” Thompson said.

Research was conducted by AKG through research agency Pollright which conducted an online survey of 103 financial advisers during November and December 2021, and independent research agency Opinium which surveyed 2,000 UK adults aged 18-plus between January 07 and 11, 2022. Qualitative research was conducted among 18 intermediary firms by market research specialist Frank Fletcher of Widewater Consulting, with the interviews taking place during October and November 2021.