As an industry we are very good at designing products and services in silos.
This does not always deliver good customer outcomes.
Over the years there has been much talk about joining up advice from pension saving to housing wealth, but too often we fail to deliver holistic outcomes.
The later life lending market is not immune to these challenges but it is in a good position to join up some of the dots and deliver what consumers are increasingly seeking.
Lifetime mortgages have historically been purchased by those aged in their late 60s or early 70s and, according to Key, one of the companies in the specialist equity release sector, the top five reasons for entering into a lifetime mortgage are:
- Home or garden improvements
- To go on holiday
- Pay off debts
- Treat or help family/friends
- Clear outstanding mortgage.
As those looking at the benefits of releasing equity from their homes increases - almost 83,000 customers took advantage in 2018, according to the latest quarterly survey from trade body The Equity Release Council - their needs and wants are changing, and fast.
The industry has responded well over the years to customer trends, with the introduction of drawdown products, the ability to overpay penalty-free up to 10 per cent, make regular interest-only payments on all or part of the loan and even take regular income from the plans, to name a few.
But it cannot, on its own, meet all consumers' changing demands. As more and more of us near retirement in our late 50s and early 60s, increasingly they have more sophisticated needs and are likely to still be in work.
Increasing numbers of middle Britain are looking for more flexible options, which provide much the same choice as they have been familiar with from traditional residential mortgages, including lower interest rates.
For those still in work and yet to fully retire, they want ‘sleep at night options’. For example, taking out a residential mortgage with a long initial fixed rate - 10 years with a conversion option to a lifetime mortgage at the end of the fixed-rate period provides a very legitimate option.
In this regard the recent retirement interest-only mortgage introduced by the Leeds Building Society, offering a 10-year fixed rate at 3.99 per cent, should be welcome news for all of us looking for options to offer clients as they approach or enter retirement.
Although the interest rate is still high it compares favourably with most lifetime mortgage products.
Personally, I think this is a breakthrough product which will help lead the way for other mainstream lenders, banks and building societies to offer similar product solutions to the offer 55s.
At present, the consumer needs to actively seek advice at the end of the 10-year fixed rate. No bad thing, as there will be a number of options to consider, including downsizing.