Reading the Council of Mortgage Lenders’ research into what it terms later life borrowers, it is hard to avoid the conclusion that the market is no longer fit for purpose.
I have argued for some time that there needs to be a radical overhaul of borrowing for older people, including the way advice is delivered, the products offered and the general attitude to pensioners with mortgages.
This report suggests that many mortgage lenders including members of the Building Societies Association, which jointly produced the report, feel the same way.
Once you get past the report’s photo cover, which suggests older people like to garden in totally inappropriate clothing, there is a wealth of information to suggest lenders and advisers need to step up and serve this market much better.
From the advice perspective, the key problem appears to be that one group of lenders and intermediaries concentrates on pre-retirement lending and debt repayment while another regards property as a money vault and concentrates on equity release.
There appears to be little connection between the two and no simple way for a borrower to step from one market to another.
Some smaller building societies are more flexible and will consider loans for older borrowers, but most larger lenders still want to be rid of borrowers by the age of 70 or 75. Many advisers remain wary of equity release either for regulatory reasons or perhaps because the rewards and volume of business are not great enough for the effort involved.
But this segment of the market is growing rapidly. The over-55s own 63 per cent of the property wealth, worth £2.5trn. One in three mortgages taken out by people age under 55 will run beyond state pension age.
That should not be a problem if they have a secure pension income. But there remains a cautious approach to pensioners’ incomes, which can come from many sources including savings and investments.
The amount of mortgage debt held by over-55s households increased by 45 per cent from the 2006 to 2008 period to 2012 to 2014, to stand at £160bn.
There is a need for advice, appropriate products and an approach from lenders, regulators and government that is more helpful and useful to this growing group of borrowers. The CML and BSA have set the ball rolling with this report. Now it is for government, regulators and financial advisers to respond.
Growing gender gap
Prudential’s latest study into retirement incomes highlights a worrying growth in the gender gap. The research now stretches back 10 years, looking at the income expectations of those retiring each year.
From a starting point of £9,800 in 2008 the difference in expected retirement incomes had narrowed to £4,800 by 2015 with some ups and downs in between. But for the past two years the gap has grown.
While women’s hoped-for retirement income has stagnated at £14,300, men’s has grown to £20,700 increasing the gender gap to £6,400 – a 37 per cent difference. There might be many reasons and career breaks are clearly one. But this does not explain why the gap is growing.
Is it the strength of financial advice? Are men more willing to engage with financial advisers, the majority of whom are men?
Is financial advice biased towards finding a better outcome for men?
Does the pension tax system, which offers greater rewards for higher rate taxpayers, lead to more money going into men’s pensions? Women make up just a quarter of higher rate taxpayers – and have done so for the past six years.
Several studies have suggested that when it comes to investing women are, in general, more risk averse than men. However, these studies may not be reliable as it has also been suggested that only those with interesting outcomes are actually published.
Prudential and others should conduct more research into this subject because, while the fact that women are still retiring on smaller incomes is interesting, what we really want to understand is why and what can be done to address the situation.
Inheritance tax
The news that inheritance tax receipts exceeded £5bn for the first time in the 12 months to the end of May illustrates what a big income source IHT has become for the government.
No wonder Jeremy Corbyn has his eyes on property and would like to row back on higher housing allowances.
All those pensioners who stayed at home in protest at prime minister Theresa May’s planned social care and winter fuel allowance changes might wish to consider this if we are forced to the ballot boxes again in a couple of years' time.
Tony Hazell writes for the Daily Mail's Money Mail section
