Demand rising for later life lending advice

15 June 2022

More than half (51%) of advisers have seen an increase in demand for advice on later life lending and 58% expect demand to continue to rise over the next 12 months, a new paper from AKG Financial Analytics has shown.

According to the “Future of Later Life Lending – Targeting Responsible Market Growth” research paper, carried out in partnership with equity release provider Key, the later life lending market in the UK is now worth £153.9 billion, with £54.9 billion worth of new lending and product switching having taking place in 2021 alone.

Over-55s were found to have mortgage borrowing – standard, retirement interest-only 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.

AKG said the study found that more than three quarters (77%) of advisers expect demand to rise in the next two to five years and 79% expect to see an increase in the next six to 10 years.

On average, advisers said nearly a third (30%) of their customers aged 55 and over had outstanding mortgage debt, with a quarter (25%) also having other debts.

Nearly one in six consumers (14%) expect to repay their mortgage between the ages of 65 and 70, while one in 10 (9%) were unsure when they would clear their property debt. Around a third (35%) welcomed the ability to borrow in later life.

Furthermore, only 11% of consumers said they felt financially prepared for later life, while 21% said they were quite well financially prepared but cautious. However, more than a fifth (22%) didn’t feel they were financially prepared.

While the need to borrow in and into retirement is expected to increase going forward, AKG said the paper had shone a spotlight on areas that required improvement to reach “optimum consumer outcomes.”

AKG called for greater consumer education on if, when and how property will play a role in retirement planning and said the discussion on property wealth should be fully integrated into retirement / decumulation processes.

The paper also suggested that bridging the advice gap between standard mortgage and specialist later life lending advice as well as between siloed mortgage and investment advice was critical to meeting growing customer demand.

In addition, the market should also consider how to provide ongoing training, qualifications and regulatory oversight required to support the growing number of advisers looking to offer more holistic solutions and encourage sources of guidance such as Citizens Advice and the Money and Pensions Service to develop their holistic later life lending and wider property related retirement planning support accordingly.

Matt Ward, communications director at AKG said: “While we are pleased to be in a position to unveil an assessment of the size of later life lending in the UK, it has 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. 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.

“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.”

Simon Thompson, group CEO at Key Group, added: “Today’s 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.  By clearly defining the market, AKG has provided a platform on which people and businesses can make concrete future plans.

“Equity release, retirement interest-only mortgages and standard mortgages taken out by older borrowers all have a role to play in helping people to achieve what they need and want in older age.  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.”

Professional Paraplanner