How have market challenges impacted the later life lending market?

MD highlights how rate rises and LTV contraction are prompting change

How have market challenges impacted the later life lending market?

Equity release advice is needing to adapt fast to meet the challenges of the past year, according to Chris Bibbey, managing director of specialist later life finance company, Key.

Interest rate rises, LTV contraction, Consumer Duty implementation, FCA sector reviews and new product innovation have all impacted the market – requiring it to raise its game, Bibby (pictured) told Mortgage Introducer.

“Specialist advice in the equity release sector has had to adapt very quickly to remain fit for purpose,” Bibbey explained. “But with that challenge comes great opportunity, as older borrowers look for help from high monthly mortgage payments and insufficient pension savings to fulfil needs and wants.”

Key focuses solely on customers who are over 55, providing advice, and later life mortgage and real estate planning products.

“A healthy and robust later life lending sector can really deliver on the needs of many different profiles of older customers – acknowledging that borrowing into later life is a reality for most and should not be considered a last resort for the few,” said Bibbey.

“The broad range of customers needing solutions means specialist advice in our sector can no longer take a narrow product view. Advice must clearly be led by customer affordability and balanced by the needs and preferences of that customer and what they want to achieve, with minimising the total cost of borrowing at the heart of the advice process.”

He added: “We have worked hard at Key to embed a new advice philosophy and provide new tools to help advisers. Specialist later life lending advice must cover the full range of options, and if it does so, it can have a very healthy future.”

How can mortgage brokers benefit from the later life lending market?

Bibbey is clear that brokers can gain from getting up to speed with what’s available to help older clients.

“Properly engage in the later life market and ensure you are aware of all the fantastic product innovation that has happened and continues to emerge,” he urged. “Then, focus on the service you are providing to your older clients and question whether it is delivering the very best outcome for all different profiles of customer.

“If you want to commit to extending your qualifications and offering the full suite of later life mortgage products, then there are great tools and training available through platforms like Air. Or if you want to stick to your knitting in terms of mainstream mortgage advice, then it is important to refer your older clients to a trusted specialist adviser like Key.

“Whatever the right route for you and your business, Consumer Duty obligations alongside the commercial opportunity provides some clear motivation for brokers to really engage with later life lending in 2024.”

The MD of Key considers the company’s relationship with mainstream mortgage brokers to be vital.

“The successful evolution of the market will require specialists and mainstream advisers working closely together,” Bibbey reasoned. “Mainstream advisers will no doubt face similar challenges with older borrowers in terms of considering the full range of product options for customers during the advice process.

“We provide a simple referral service to look after those clients and provide the broad later life lending advice these customers need.”

Read more: Equity Release Council issues new guide on clear communication

What is the future for the later life lending market?

Bibbey is notably confident about where the market will be in 12 months’ time.

“I think we will see a resurgence of lending volume in the specialist later life lending sector, as rates come down, and lifetime mortgage LTVs will grow again to meet the needs of more customers,” he said.

“We will see continued product innovation with products that bridge the gap for customers between mainstream mortgages and traditional roll-up lifetime mortgages, offering a whole range of different payment options and other flexible features.

“Coupled with the demographic and socio-economic trends that are unrelenting, this will enable the total size of the later life lending sector to grow rapidly. Finally moving away from being a sector of last resort, to one that provides a realistic way of managing mortgage debt through later life, enabling people to benefit from their accumulated housing wealth and so empowering a better retirement for many.”

He continued: “We would like to see the government make some specific moves to make it easier for parents and grandparents to gift money to children and grandchildren and avoid potential inheritance tax (IHT) penalties - by removing the seven-year claw back rule on property related gifting.

“We see the role of gifting property equity through equity release as a way of turbo-charging the transfer of wealth through the generations and into the hands of first time buyers. Currently the fear of IHT clawback is preventing more homeowners from making this move. A change in tax regulation could energise both ends of the mortgage market.”

Bibbey, who has previously worked with high profile brands such as Virgin Media, Barclaycard and Tesco, has headed up the Key operation since the start of the year.

“My role of managing director covers the day-to-day operations,” Bibbey said, “from building demand through our marketing activities, to our customer engagement teams who first speak to our customers, to our advisers providing the specialist advice and all the wider support functions. It is the full end-to-end spectrum of the business.

“Key Advice has evolved over recent years to cover our own in-house propositions. Irrespective of the brand and proposition, we are providing the same high standard of specialist later life lending advice to customers, covering the full range of later life mortgage products options and alternative strategies, such as downsizing, to ensure consistently good outcomes.”

So, what one business lesson from Bibbey’s career so far, would he want to share with the Mortgage Introducer readership?

“Always put yourself in the shoes of your customer,” he replied. “I spent some of my earlier years working for Virgin and the benefit of that customer focus, always considering processes through the lens of the customer has always stuck with me.

“More often than not, in my experience, delivering long-term  value for customers and the business has always come from delivering a consistently excellent customer experience.”