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Later life lending and current market uncertainty

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 19. October 2022

Looking to speak to mortgage brokers about the current market uncertainty and whether this may impact later life lending such as equity release. 

  1. Will uncertainty in financial markets impact later life lending, if so how? 
  2. What advice are you giving to clients who are looking down the later life lending route now? 

3 responses from the Newspage community

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Aaron Strutt
Product and Communications Director at Trinity Financial
To say these lifetime mortgages have increased in cost dramatically would be an understatement. Rates were priced below 3% last year. The key thing that makes the impact of these interest rates so significant is the cost of servicing the interest and if the interest is rolled up, the compounding of interest which erodes the equity in properties more quickly. Lifetime mortgages are being promoted as a solution to lack of income during the cost of living crisis but with these interest rates it is crucial that borrowers fully understand the impact of the rolled up interest. These products may still be the only option or the most suitable route for a client but people need to go into these transactions with a full understanding of the implications of the current rates.
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Mark Robinson
Managing Director at Albion Forest Mortgages
The current uncertainty in the financial sector will undoubtedly affect all aspects of lending. This includes lifetime mortgages and equity release. Unfortunately we generally need to advise based on the situation at hand, and whilst we provide our clients with the right solution for them, this is not always driven by the interest rate available. We cannot change that, however, it may affect the percentage of people that want to go ahead with later life lending at present.
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Dan Osman
Head of Later Life Lending (Age 55+) at UK Moneyman
1. Some who had been considering equity release as a matter of aspirational borrowing as opposed to need are taking a wait and see approach to market volatility and I can see this continuing for some time. Others, especially those with interest only mortgages coming to the end could well feel pressured to act quickly in anticipation of further BoE base rate rises. If their terms are not coming to an unavoidable end, getting the client to participate in their own income stress test (eg is a further 2% rise affordable?) can help to reduce the pressure and allow a more measured process. We are also seeing exploratory enquiries from parents/grandparents worried about the pressure on their younger family members and laying the ground for ways they could help if the economic situation worsens. 2. Our advice is primarily that of caution at the moment. Clearly there are still some cases which have to be dealt with as a matter or urgency. Where possible we are looking at retirement interest only and other interest serviced routes which are more cost effective to re-broke at a later stage if and when rates drop. With lifetime mortgage cases of aspirational borrowing we are recommending waiting, use of alternative solutions or a drawdown approach where appropriate if the client is unwilling or unable to wait to meet their initial objectives. Not only does this minimise the interest burden but it leaves open the possibility of taking funds from drawdown at potentially lower rates in the future. A positive side effect of minimising the initial lump sum is that, in the event of a significant drop in future interest rates, a re-broke is likely to become more viable if in the best interests of the clients. We still find clients coming to us with needs which can be satisfied by grants or other forms of local authority/third sector funding which have not been explored. Often in such cases, it is the immediate need which can be funded allowing the clients to wait or take less than originally required.