Since LiveMore launched in 2020, we have been building up our mortgage product suite for borrowers aged 50 to 90+ starting with interest-only, followed by retirement interest-only, capital & interest and our recently launched a lifetime mortgage.
Our view is that in many cases, older people can take out a mortgage if they have sufficient income through the likes of pensions, investments, rental income and/or salary if they are still working. If none of our mortgage options are suitable then it makes sense to consider if a lifetime mortgage might be a possibility.
Although it may be a relatively small part of the mortgage market, lifetime mortgages can have a role to play in later life lending in certain circumstances. But that role must be seen as part of a wider picture, a holistic view with all possible options available to them.
Financial reality
Over-55s in the UK have a net property wealth of £4.4tn. However, this doesn’t help with day-to-day living costs, which have become tougher to manage during the cost-of-living crisis. Rising daily costs for essential items, such as food and fuel, pushed inflation to a 40-year high. It has made cost-of-living a concern for 86% of UK adults.
This is a demographic that typically sees income reduce in later years as they approach retirement. But even for those who carry on working, wages are not keeping up with rising costs. The Resolution Foundation says the past 15 years have been an ‘unprecedented’ era of wage stagnation, with UK workers now £11,000 worse off a year.
People are also living longer; nearly a fifth (18.6%) of the population are aged 65+ in England and Wales, while there are more than half a million (527,900) who are at least 90 years old. Asset-rich and cash poor, these people need options that can help them feel positive about the future.
That’s why lifetime mortgages can be a solution and perhaps explains why, according to the Equity Release Council, equity release lending reached £6.2bn in 2022 – a 29% increase on 2021.
Consumer Duty
Offering equity release makes sense for any over-50s lender in 2023, given the new Consumer Duty rules. The FCA’s new legislation makes it a legal requirement to offer products and services that meet the needs of your identified target audience.
Therefore, it is important for intermediaries and lenders to understand the changing income status of customers over time. It’s not just about what happens now, it’s about the future as well and that is one of the main considerations of the new Consumer Duty rules.
This has always been a top priority for us, which is why we remunerate intermediaries if they carry out an annual customer care call to ensure the product is still suitable for their client. A mortgage might be the best solution for a 55-year-old today but further down the line, when their situation changes, a lifetime mortgage may be more fitting.
For any intermediaries thinking of diversifying in the later life space, we think it’s worth getting the extra equity release qualification (CeRER) to give your clients another route to achieving their goals. If you’re already CeMAP qualified, it’s not as big a jump as you might think.
Leon Diamond is chief executive of Livemore
