Size Of Opportunity
Here’s our view of the top 7 factors driving the growth of later life lending.
Increased life expectancy
We are living longer. In the UK, the average life expectancy of those born in 2013 is over 90 years old, and the number of people aged 65+ already outnumbers those under 16.
The accepted model of paying off a mortgage by retirement is changing rapidly, creating a new set of potential borrowing requirements for the older generation.
Phased retirement plans
As people live longer, their pension savings are also being spread more thinly, leading to phased retirement plans or part-time working. Often, this is accompanied by a need to continue to have some form of mortgage against the property.
Interest only mortgage maturities
The sale of interest only mortgages was commonplace in the 1990’s and early 2000’s. Many now face endowment shortfalls, or have no repayment vehicle at all.
For more information see our article on serving interest only clients.
Many retirees know that the right answer to sorting their finances is to downsize, but many want to do it on their terms. During earlier stages of retirement, people want to stay in and enjoy the family home, planning to downsize in later retirement as their circumstances change.
Many of our later life lending products include flexibility to allow downsizing.
Pension freedoms have resulted in much more flexibility as to how retirees use their wealth in retirement, and the role of their property is playing a central role.
Bank of Mum and Dad (or Gran and Grandad)
With living longer comes a delay in wealth passing through the generations. This can give rise to an emerging need to release equity during retirement in order to help the next generation to get onto the property ladder, or fund other life events such as university education or a wedding.
Rising health care costs
As we age, we’re increasingly likely to suffer with health conditions. With longer retirement, the provision of long-term care becomes a key financial consideration for many.
Funding of social care is moving from government reliance to individual self-support. The cost of social care is high and will continue to grow. Current estimates show an average £31,200 annual residential care costs, rising to £43,700 if nursing care is necessary (Laing & Buisson Care of Older People UK Market Report 2016/2017). Housing equity is already proving to be a more important source for funding these needs.
These drivers are fuelling a vibrant and growing later life market, and demand will continue to accelerate. Offering a range of mortgage products tailored to this market will ensure that with Hodge Lifetime together we will continue to serve your clients.