With more than half a million retirees still paying off their mortgage, making sure older borrowers receive the right mortgage advice is more important than ever.
The UK has an ageing population, longer mortgage terms, and many older borrowers who want to keep working into retirement. All of this means the market for older borrowers has the potential for further growth.
SunLife recently surveyed 2,000 people over the age of 50 and found that of the two-thirds (68%) that are homeowners, more than one in five (23%) are still making mortgage payments. Most of these (87%) are still working, but 13% are retired and still managing a mortgage.
In the first quarter of 2024, UK Finance reported 28,840 new loans for borrowers over 55, totalling £4.3bn. Some 14,854 of these were for residential purposes like house purchases, remortgages, or retirement interest-only (RIO) loans, 9,210 for buy to let (BTL), and the remainder were lifetime mortgages.
With the rising cost of living, we could see more older borrowers looking to extend their mortgage term into retirement and continue working on a part-time basis. Opting for semi-retirement can be a way to be financially better off while still having time for travel and hobbies.
Of those over-55s who took out residential loans in Q1, just under 11,000 were employed, around 2,500 self-employed, and 1,010 retired. In total, residential later life loans in Q1 made up 7.9% of all residential lending, while BTL later life loans accounted for 22.5% of all BTL business.
Older individuals who continue to work into retirement often fall into two categories: those who work out of necessity and those who choose to work because they enjoy it.
Having the right mortgage advice can make a big difference. For such borrowers, just because they are older, this shouldn’t mean the mortgage market is off-limits.
Unaware of their options
The income sources of retirees or semi-retired borrowers can be quite complex. Someone in semi-retirement might juggle a part-time wage, savings, investments, and also receive their pension.
As discussed, the financial situation for those over 55 can differ greatly. You might have one person prolonging their retirement in order to comfortably pay off their mortgage. Meanwhile, another might be financially wealthy and asset-rich, possibly an expat living abroad who still needs a base in the UK as either an investment or a place to live when they return.
The mortgage market for older borrowers has grown significantly over the past decade. While this is great news, it also means some older borrowers might not be aware of their choices, given the surge in options for older borrowers is relatively recent.
They might think the market is closed to them, with no viable options, perhaps due to past experiences or word of mouth. Many older individuals, especially those already retired, might not realise how some lenders’ criteria have changed to accommodate them or that options such as remortgaging to raise capital for home improvements are available to them.
Giving guidance and advice to older borrowers
Just like younger borrowers, older borrowers need to review their options and mortgage rates regularly, especially as we move out of a low-interest-rate period, with borrowers at risk of moving onto their lender’s higher standard variable rate (SVR).
There’s also the issue of familiarity with financial products. Some older borrowers might not be as familiar with these products as younger borrowers.
They might not go online as much or still be loyal to their original mortgage lender and not be aware of the benefits of a mortgage broker in the same way as a younger borrower.
This is why it’s also important for brokers to spread the word about the options for older borrowers when marketing and especially for independent financial advisers (IFAs) who might come into contact with older borrowers when giving wider financial advice.
Mortgage lenders are here to support older borrowers and brokers in finding the most suitable mortgage for their needs. Some lenders, including us, don’t have an upper age limit and can offer mortgages to those approaching or already in retirement.
Even brokers might be surprised at the options available for older borrowers.
