The Building Societies Association has committed to review maximum age limits on mortgages, as one way to better support those needing loan finance into and in retirement.
This action is one of nine recommendations in an interim report launched today (12 November) at the BSA annual lunch, reflecting a major societal shift as the population grows older.
The UK already has 11.6m people over the age of 65. By 2034 it is estimated that around a quarter of the population will be aged over 65.
At the same time a mix of other factors - from house prices to student debt, the divorce rate to the abolition of the default retirement age - mean that consumers are tending to buy later and go for longer repayment terms, according to the BSA.
The BSA’s research shows that around half of 25 to 34-year-olds think they will need a mortgage that lasts into retirement.
The report also recommended better cross-departmental co-ordination to rationalise government policy on the treatment of older borrower’s housing wealth and better availability of suitable housing options for older home-owners who want to move to a property that meets their changing needs.
The BSA also recommends working with insurers to develop policies that enable lenders to mitigate the different risks involved in lending to older borrowers, as well as improving the availability of holistic financial planning in retirement.
Dick Jenkins, chairman of the BSA, stated that the Financial Conduct Authority has been involved in the preparatory work and the association has also sought the views of many others across the industry.
At Tuesday’s Council of Mortgage Lenders annual conference, the FCA’s director of retail supervision and authorisations Jonathan Davidson said that as the number of people aged over 80 is set to more than double in the next 25 years, there is an increasing demand for a broader range of products to meet these changing needs.
“The home is now seen as a pension. A way to pay for long-term care and as something to pass on but equity release is not the panacea for this problem,” he stated, adding that the regulator is keen to support innovation in this area.
His comments followed the CML’s report on consumer demand for retirement borrowing, which highlighted the need to promote sensible and suitable mortgage finance to support both the aspirations and potentially the social care costs of older home-owners.
The BSA’s head of mortgage policy Paul Broadhead, added that as the average age of a first-time buyer continues to increase, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending.
“The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK.”
Nigel Waterson, chairman of the Equity Release Council, said that this week’s reports from the BSA and CML show a collective will to improve the outlook for older borrowers.
“Equity release will be an important part of the broader solution, and we look forward to cross-industry talks to add to those already ongoing with the regulator. Efforts must focus on raising awareness and improving access to advice, as well as continuing to innovate with new products and features.”
Dean Mirfin, technical director at Key Retirement, argued that there has to be more interplay between product design, innovation and the advice provided, especially as people age.
“Borrowers cannot move between the phases of accumulating and decumulating housing equity without the right advice and in addition, the structure of each type of mortgage is different and shouldn’t just morph from one product type or phase to the next.”
peter.walker@ft.com
