Why later life lending is a growing market

Brokers urged to embrace the possibilities it offers

Why later life lending is a growing market

This article was written in association with Family Building Society.                                         

“The later life lending market is growing exponentially,” reflected Paul Roberts (pictured right), senior account director at Family Building Society. “It’s a very broad market, the population is getting older, and affordability is getting harder generally.”

Nathan Waller (pictured left), a business development manager (BDM) with the Society, agreed.

“We’re seeing a huge increase in people remortgaging, freeing up funds and choosing to spread their wealth. Later life lending covers everything from clients needing a mortgage in retirement, to supporting their children on something like a joint borrower, sole proprietor arrangement where the parents assist with the borrowing and have their names on a mortgage, but not the deeds,” he explained.         

“We’re an intergenerational lender in the truest sense of the word, whether it be lending to an individual or providing funds to assist other members of their family with borrowing. There are other lenders who offer later life, of course, but the conversations we can have and the way we can structure a case does set us apart. We can discuss a case and build it around a client’s individual circumstances, and really have a good discussion around it. I would say that’s probably one of our greatest strengths.”         

Roberts continued: “The later life lending market is a huge proportion of what we do. We are specialists in this field and believe we make a real difference. If you look at the way we treat pensions and investments as income and how we can use that income, it’s vastly different to how the high street does it. Take pension pots for example where we have a very unique angle. We’ll take 80% of the value of the pension pot and will divide the mortgage term into that pension pot, so that we can increase affordability to get the mortgage to fit. If you were to talk to our clients, they would likely speak about just how flexible we are. I still think there’s a long way for many of our competitors to catch up with us on that.”

As a BDM himself, Waller noted that the relationship with intermediaries was key.

“It’s vital for us,” he emphasised. “Ninety-five per cent (95%) of the mortgage business that we generate as a lender is introduced from brokers, so they are arguably the most important part of our business. We value their business, so we want to make it as easy and as straightforward as possible for them to deal with us. We are readily available to them, they can speak to us on a human level and, as BDMs, we can contact our underwriters and go through individual cases. We assist through every stage of the application process, all the way through to completion.”

Roberts concurred that Family Building Society’s personal contact with advisers was important; that its tailored and hands-on approach, ensured that, wherever possible, it met clients’ individual borrowing requirements.

“We just need more intermediaries to embrace later life lending - it will make life easier for them and their clients,” he said.

Waller advised: “I think it’s key for brokers to be able to have a wider understanding of the whole market so that they’ll be building long-standing relationships with clients throughout their lifetimes.”

Both believed there was more to be done to fully acquaint the intermediary community with the benefits of later life lending.

“The challenge is really the education of brokers, saying to them that these options are available to you,” Waller considered. “Sometimes brokers may be wary of some of the extra questions asked, or the extra requirements of compliance. There have been challenges where people have perhaps spoken to somebody who may not know the market particularly well or the broker just assumes that when a client is aged over 70, no lender is going to touch them. So, it’s about having open conversations, not being reluctant to talk about it and saying there are standard mortgages which you can do until a client is 95-years-old.”     

Roberts chimed in: “There are a multitude of options in this marketplace, and we offer a good proportion of them. It’s not, perhaps, just the intermediary market that needs educating. I think customers still need a huge amount of education. I hear stories where clients say, ‘I didn’t think I could get a mortgage past the age of 70’. We need to get the message across that they can.” 

Waller pointed to figures in recent years suggesting that the value of later life lending annually exceeded £28 billion. “It’s not a small area of the market, it’s a significant amount,” he declared. “It makes sense to continue to serve those people rather than to keep shutting the door on them. The market is only getting bigger.”      

Roberts offered: “I think the biggest issue for some of the high street lenders is that these are older borrowers, and they don’t have employment income, be it self-employed or employed. They often have pension income and modern credit scoring systems can’t quite cope that. However, older customers are generally safe bets… they have fixed pension income or pension pots and investments which are effectively guaranteed, and most of our clients may well be below 60% loan to value.”
Despite the evident growth of the later life lending market, it has faced its challenges in recent months, in common with many sectors of the industry. “The one thing that has affected some of the scenarios we see has been the affordability - it is tighter,” Waller acknowledged. “We have to be reasonable and cautious, to ensure that mortgage payments are as affordable now as they will be in the future.”

Roberts reasoned, positively: “Hopefully with the recent announcement of the Bank of England base rate staying as it is, that might just take a little bit of pressure off, we’ll be seeing swap rates start to reduce a little bit and that may just take some of the pressure away.” 

Family Building Society is the UK’s 11th largest building society, with over 58,000 members and £2.4bn of assets. A mutual organisation, owned by its saving and borrowing members, over 80% of its borrowings are raised by deposits from individuals. Family Building Society’s mortgage products are underwritten by a team who look at each case on an individual basis based on common-sense and tailored credit checks rather than credit scoring.