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Heather Crinion Operations Director At Marsden Building Society

Navigating a rapidly evolving later life landscape

Published on: 29 February 2024

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The later life lending market has significant growth potential. With an ageing population and rising living costs, Later Life and Retirement Interest Only (RIO) mortgages could be attractive lending options for those over 55. However, to navigate this market efficiently, understanding both the opportunities and challenges ahead is crucial.

The cost-of-living crisis remains a concern, particularly for those on a fixed income. According to UK Finance, the market could be subdued in 2024, with the cost-of-living crisis pushing more customers into arrears. They estimate arrears cases could be around 128,800 by the end of the year – a 22% increase on the 2023 projections.

Moreover, high interest rates could dampen demand for later life lending, making it essential for lenders to remain competitive to onboard new customers. While little can be done about interest rates, interest-only mortgages could provide the flexibility needed to help navigate the tough economy.

In 2023, 90% of our Later Life mortgage applications completed on an interest-only basis.

The affordability of this mortgage type is ideal for the current climate, considering how we stress test interest-only mortgages based on ‘interest-only,’ rather than repayment.

To meet future demand for later life mortgages, product innovation will play a vital role. People are living longer, which means we’re likely to see an increasing need for later life lending across an ageing demographic. With the housing market being so competitive, applications in later life may help borrowers support their younger family members onto the property ladder – something we’ve seen first-hand here at Marsden Building Society.

For instance, we recently helped a customer seeking to borrow against their unencumbered home to help their child buy a property. The customer plans to work past the state pension age, meaning we could assess income up to age 75 while factoring in 100% of their private pension. Additionally, minimal outgoings ensured affordability wasn’t an issue, and we could offer a 13-year interest only solution.

It's also essential to consider the digital divide between older and younger generations. Financial service providers must communicate effectively to both older customers and their families, who may be involved in the decision-making process. Understanding the concerns of each generation is vital, as not only are younger generations involved in the finances of older family members, but they’re also future lending customers. Embracing them now could create loyal members in the years to come.

Digital innovation is increasingly important for financial service providers to future-proof their services by investing in technology while also remaining loyal to their current customers who require a more traditional approach. Finding that balance is key to the future of building societies.

The success of the UK’s later life lending market hinges on adaptability, innovation, and a deep understanding of the evolving market landscape. By tackling the challenges head-on and capitalising on the opportunities, lenders can play a vital role in ensuring responsible access to financial solutions for an ageing population and shaping a future where later life lending is seen as a valuable tool for achieving financial wellbeing.

 

- Heather Crinion, Operations Director at Marsden Building Society

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