Today I’m going to focus on the final keynote speech, where the FCA’s Emily Shepperd spoke about the opportunities and challenges in a changing landscape.

It was good to hear Emily highlight how building societies have long been champions of underserved markets, reaching more complex first-time buyers, the self-employed and other customers who often find themselves overlooked by high street banks. She described our sector’s approach as “spotting opportunities when others see risks”, which I think is a great way to summarise the more personal approach to customers, in terms of both the service and products offered.

But, as we expect from our regulator, there were also some warning signs woven in.

This included the need to embrace technology and digital capabilities and to ensure that our lending and savings decisions remain in the long-term interests of the consumer. This is in line with the requirements of the new Consumer Duty, which will apply to closed as well as open products from July. She also flagged that the regulator’s current rules allow for flexibility, noting that the FCA is open to discussing any propositions, something that we will certainly be following up on.

However, the most interesting topic Emily touched on was lending into retirement, which she said is moving from “a niche to a norm”.

She recognised building societies’ ability to balance risks but also posed the question as to whether now was the time to consider if products for those in later life meet the requirement to deliver good customer outcomes.

There is no denying that mortgage terms are getting longer, with first-time buyers now likely to take over a 30–35-year term, compared to the more traditional 25 years. And, as the age people are taking their first step into homeownership is getting later, it’s almost inevitable that for many their mortgage term will run beyond the current normal retirement age. But this is hardly surprising with spiraling house prices and rising interest rates significantly impacting affordability. A longer repayment term reduces monthly mortgage payments, although it does mean that the borrower will pay more over the long term.

But what is their alternative, if they don’t take out an affordable mortgage, they will remain in rented accommodation paying rent for the rest of their lives, without the security of tenure that many renters can only dream of.

I used the term ‘current normal retirement age’ deliberately, as the world is changing and retirement is no longer the single, point in time event it has been in the past.  There are two factors impacting this:

1. We have an ageing population, we no longer have a compulsory retirement age, and people are living and working longer. I saw an interesting fact recently that suggests we are living 5 hours longer every day!
2. Retirement is evolving from a point in time to a process. Individuals are often choosing to phase towards retirement, reducing hours and often in different roles in later life and working beyond the normal retirement age. This, in part, is a result of pension provisions being insufficient to maintain their lifestyle.

For almost 250 years building societies have been supporting individuals and families into homeownership. They have continuously evolved their products to meet the needs of the homebuyers of the day.  They have robust checks to determine a borrower’s affordability now and in the future. However, regulation still enforces different risk modelling for pre- and post-retirement.

It feels like we are on the cusp of a big change in the UK housing market. We have first-time buyers struggling to achieve the dream of homeownership, people in the 50-70 age group who can afford their mortgage payments but can be restricted by lending regulations, and retired homeowners who may be asset rich but cash poor.

Perhaps there is a role to play for a new model of shared ownership. First-time buyers could start their homeownership journey owning a part of their property, gradually staircasing to full ownership, before potentially staircasing back to shared ownership in their retirement releasing capital to supplement insufficient pensions.

So when the FCA asks us what we are doing about lending into later life, I say we need a partnership between industry, regulators, government and society. We need flexibility to allow new thinking and new solutions to respond to today’s changing landscape. As our recent report said, these are age-old problems that require modern solutions.

Building societies stand ready and willing to start those conversations.

Paul Broadhead is head of mortgage and housing policy at the BSA