Growth of Later Life Lending

04 December 2018

By Richard Pike, sales and marketing director of Phoebus Software Ltd

“Equity release”. ”Later life lending”. “Lending into retirement”. Today these are all well used phrases that capture the fact that with the UK population getting older, there needs to be a mortgage market that assists their requirements, especially if they can demonstrate affordability though pensions income and investments, etc.

This later life sector continues to grow aggressively. It was predicted that the equity release market could reach £2.3billion this year. Today’s projections expect it to top £4billion, not only fuelled by the changes in pensions regulations, but equity release becoming an increasing part of an overall retirement funding strategy. It is also being fuelled by borrowers choosing to improve their properties, make gifts to family members and repay unsecured lending. The average loan size is also on the increase with lending in the three months to the beginning of October around £5,500 higher than in the same period last year. 

Funding continues to come to market for equity release resulting in the continued launch of new equity release lenders, albeit this seems to have slowed down. Companies wishing to provide funding to the market will look at existing equity release businesses and their infrastructure as a way of entering the market and effectively outsourcing the operational aspects to an established, successful business. The growth of this market will continue and whether an intermediary considers advising on equity release or an institution is looking at entering the market, there is still a real opportunity to work in an expanding market that, in the right circumstances, can provide legitimate value to the borrower. 

In terms of changes to the market, we continue to see more innovation.  This includes products offering borrowers assistance if they have an interest only mortgage nearing the end of its term known as retirement interest only mortgages (RIO’s). These are seen as a legitimate aid to keeping borrowers in their homes, albeit there is still some scepticism on what level of repossessions will actually happen at the end of a term when the borrower is still making payments on term expiry. Generally speaking, the main criteria is that the borrowers named on the mortgage need to both independently be able to afford the mortgage payments during retirement. The launch of such products will make the later life market more accessible to lenders, and will only boost volumes moving forward.

To summarise, the equity release and later life markets will continue to grow and are becoming more accessible. Looking forward to 2019, whether someone is an intermediary or an aspiring lender or funder, now is an excellent time to grasp the opportunities in what is a buoyant and growing market and one that is now a proven success.  

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Debbie Staveley
Director and Owner,
bClear Communications

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