The later life lending market in the UK is worth up to £153.9bn, according to a research paper by AKG Financial Analytics.

Sponsored and produced in collaboration with Key Group, the research shows that £54.9bn worth of new lending and product switching took place in 2021 alone. 

In the paper, AKG defines the market as “standard, retirement interest-only or equity release mortgages for borrowers over the age of 55 with terms that extend into, or start during, retirement”.  

This builds on the work undertaken through a collaboration between UK Finance, the Equity Release Council, Association of Mortgage Intermediaries, The Investing and Savings Alliance and The Building Societies Association at the end of 2021.

Analysis for the research paper shows that over 55s have mortgage borrowing of around £99bn while annual new lending across all products is worth up to £14.9bn and product switching is valued at a further £40bn a year.

While the Paper highlights that later life lending will continue to grow, it identified areas that needed further development if an optimum consumer outcome is to be delivered.  

These areas include greater consumer education on if, when and how, property will play a role in their retirement planning, properly integrating the discussion on property wealth into retirement/decumulation processes and bridging the advice gap between standard mortgage and specialist later life lending advice as well as between siloed mortgage and investment advice.

It also suggests considering how the market will provide the ongoing training, qualifications and regulatory oversight required to support an increasing number of advisers looking to offer more holistic solutions, encouraging trusted sources of guidance and support such as Citizens Advice and the Money and Pensions Service to develop their holistic later life lending support accordingly.

In addition, it highlights that further product development based on research and customer data/knowledge will be required due to the increased expectations within the proposed Financial Conduct Authority (FCA) Consumer Duty.

Elsewhere, the research found that more than half (51%) of advisers had seen an increase in demand for advice on later life lending in the past year and 58% expect a rise in demand over the next 12 months. 

Demand is expected to continue to build with 77% expecting a rise in the next two to five years and 79% in the next six to 10 years with 30% banking on a substantial increase.

Advisers surveyed estimated that on average nearly a third (30%) of their customers aged 55-plus had outstanding mortgage debt with a quarter (25%) also having other debts.  

This was further supported by the consumer research which found that 14% expected to repay their mortgages between the ages of 65 and 70, while around one in 10 (9%) did not know when they would clear property debt. Around a third (35%) welcomed the ability to borrow in later life. 

When asked about their confidence in achieving a comfortable retirement, only 11% of consumers said they felt they were financially prepared for that stage of their lives.  

Meanwhile, 21% said they were quite well financially prepared but cautious about bills while at the other end of the spectrum 22% didn’t think they were financially well prepared and were concerned about this. 

Key Group group chief executive Simon Thompson says: “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,” Thompson adds. 

More2life chief executive Dave Harris comments: “Today’s report not only clearly defines the size of the existing later life lending market but also hints at its future potential with increasing numbers of consumers looking to lenders, advisers and other trusted sources of information for support. While planning your retirement finances used to be a tick box exercise, people now have greater choice and responsibilities than ever before.”

“What people can expect from products within the later life lending industry is light-years away from what we saw even ten years ago but this research clearly shows that not only do we need to keep innovating but ensure that the wider adviser community better understands their options. There is much to talk about and the later life lending community needs to start the conversation.”