Somewhat understandably, there is a great deal of interest about what the new Chancellor, Rachel Reeves, might announce at her inaugural Budget statement on 30 October.
The rumour mill is whirring, and for older people there are clearly going to be a number of measures that may impact their lives going forward. We’ve heard already about winter fuel payments being lost for some, while more pensioners seem likely to be paying greater levels of tax in years to come.
Indeed, recent figures dissected by Quilter, show that 3.1 million retirees will have to pay the higher rate of tax – 40% – by 2028. On top of this, you have a whole host of responsibilities that have grown for those in later life, without them necessarily understanding how they might want or wish to pay for them.
I’m thinking specifically of long-term care provision, maintaining standards of living, helping out family, healthcare costs, topping up pensions, etc.
Making use of housing equity
It’s perhaps no wonder that we see an individual’s home becoming much more central to how they might fund their later life wants and needs, and therefore why later life lending is becoming an increasingly important sector.
Despite recent fluctuations, the market presents significant opportunities for advisers who are prepared to navigate its complexities.
Recent figures from the Equity Release Council highlight a 15% quarterly increase in equity release lending for Q2 2024, with £578m achieved during that three-month period.
It also shows the number of new customers – 5,240 – was up 12% on the previous quarter, with returning drawdown customers up 4%, which in itself is a solid sign of ongoing customer engagement with their products.
This uptick suggests a growing awareness and uptake of equity release options amongst older borrowers and certainly some steadier foundations for advisers to build upon after a few somewhat unsatisfactory years.
However, we should also be aware that data from UK Finance presents a more nuanced picture, albeit for earlier in the year and covering a wider range of mortgage options for older borrowers. It’s figures for Q1 2024 show there were 28,840 new loans advanced to borrowers aged over 55 in Q1 2024, representing an 11.7% decrease year-on-year.
The total value of this lending was £4.3bn, down 8.5% compared to the previous year. Of this, £2.26bn was lent to borrowers aged between 55 and 60, marking a 9.24% decline, while £440m was advanced to those aged over 70.
This indicates a recent drop in later life mortgage lending, however, clearly shows that the wider ‘later life market’ is significantly more than the sum of its lifetime mortgage parts, plus of course this doesn’t include lending to the over 50s who also now have specific later life options available to them.
The later life lending sector has much to offer
And it is within these figures that we all, but particularly advisers, should find real positive signs to advance their interest and engagement in this sector.
For example, demographic trends further underscore the importance of focusing on later life lending. The Office for National Statistics (ONS) projects that by 2050, one in four people in the UK will be over the age of 65; with 21 million people currently over 50 in England alone.
This substantial increase in the older population is likely to generate rising demand for financial products tailored to their needs, and advisers are probably already aware of how this is translating into their own client base and what these individuals are seeking via lending means.
To engage with this fully, requires a growing commitment and an understanding of all the product options available to this demographic. It’s an evolving market too; one that is constantly producing new product options designed for different ages and different client types, wants and needs.
Advisers need training and development, sourcing, lead generation, technology solutions, plus more, in order to work freely and effectively in this space. Luckily, they can look to organisations such as Air who provide all this and more.
Plus, the market’s growth potential remains substantial. Advisers who specialise in this area will be well-positioned to capitalise on future opportunities, while those that don’t must – at the very least – be able to outline the options available to their clients and to sign-post them to those who can make the recommendation and provide the advice.
Looking forward, the later life lending sector is expected to continue on a growth trajectory. Advisers who are proactive and utilise the support offered by Air and others will be able to provide valuable assistance to clients and secure a rewarding, and burgeoning, niche within the mortgage advisory field.
