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While we are also seeing advisers becoming more engaged with later life lending, the truth is there remain far too many who feel they don’t need to be active in this space. They don’t have clients for whom they feel it is applicable, or perhaps are put off by regulatory/authorisation issues, or perceived increased risk for themselves and their business, or a combination of all this.
Yet the opportunity has never been greater for advisers to deliver a better service to their clients, meet regulatory expectations, for example Consumer Duty, and boost their own financial position by adding the growing range of later life lending options to their suite of services.
We are now seeing a great deal more creativity from providers, like ourselves, in product design fuelled by client wants and needs, as well as the shift in regulatory focus around assessing ongoing affordability, and requirements. This has created an emergent product range where there is much less of a leap from mainstream to lifetime mortgage, and with which all advisers can, and should be, engaging.
All lifetime mortgage products provide the option to make interest payments during the life of the plan, but advisers and their clients can now tap into products which reward customers with a reduced interest rate in exchange for committing to making payments for a fixed term, such as our Apex Interest Reward product, and alternatives offered by the likes of Standard Life Home Finance, Just, Pure, and Legal & General.
These products effectively serve as a real bridge between the mainstream and the traditional lifetime mortgage, spanning the gap that previously existed, not just for borrowers, but for advisers who need to provide more specialist advice for every single client who is over 50/55 and now has access to these options.
Also where the market was once dominated by products with lengthy early repayment charges (ERCs), more2life has led the way in establishing alternatives with short ERC periods, and in the case of our groundbreaking Maxi Zero ERC, no charges at all.
Providers have embraced the need for innovation, and specialist later life advisers have expanded their range of options, but we aren’t seeing enough mainstream mortgage advisers following suit.
For too long there has been an impression among some that later life lending products are only really an option for clients who have already retired, from those who might have recently given up work stretching to those far later in life.
But times are changing. Increasingly providers are creating products that are actively designed to serve younger borrowers. We have a host of products available to those aged over 55, there are now later life lending options for those aged over 50, and so as a sector, we are able to offer products for suitable borrowers who are still happily working, are able to make monthly interest payments, but who want to unlock some of the equity in their home.
As an industry, we need to do a better job in supporting advisers with this change of thinking, so that whenever there is a client over the age of 50, later life lending products are actively considered alongside mainstream mortgages, RIOs and the like.
But there are other, tangible benefits open to advisers who embrace later life lending not just in terms of meeting a range of regulatory measures. The growth of product transfers has had a detrimental impact on the bottom line for mainstream advisers since the proc fees involved don’t reflect the work being undertaken. The adviser might have to conduct multiple appraisals due to product rate changes but end up back at the existing lender, having to accept a grossly unfair, lesser proc fee from the vast majority of lenders.
Yet later life lending products not only represent a better option for a growing number of this cohort, they also deliver proc fees that actually reflect the work being undertaken. Ensuring later life lending is included in the advice process with over 50/55 clients is not just better for them, it’s better for advisers.
Whether it’s managing their existing debt, funding lifestyle needs, or simply helping family by providing an early inheritance, there is no shortage of compelling reasons for tapping into that equity.
The later life lending market is already worth around £20 billion a year, with traditional lifetime mortgages accounting for around 10% of that. As these new innovative forms of lifetime mortgage become more commonplace, as advisers add them to their service range, they are only going to represent a bigger slice of the pie.
Everyone benefits – clients get access to a new modern range of later life lending products that better meet their needs, while advisers get property remunerated for the work they carry out. Advisers who aren’t already including these products in their toolkit need to ask themselves, if not, why not - and if not now, then when?
First published: The Intermediary
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Yet the opportunity has never been greater for advisers to deliver a better service to their clients, meet regulatory expectations, for example Consumer Duty, and boost their own financial position by adding the growing range of later life lending options to their suite of services.
Opening the door through innovation
A key element which is driving increased interest in this sector among forward-thinking advisers is product innovation.We are now seeing a great deal more creativity from providers, like ourselves, in product design fuelled by client wants and needs, as well as the shift in regulatory focus around assessing ongoing affordability, and requirements. This has created an emergent product range where there is much less of a leap from mainstream to lifetime mortgage, and with which all advisers can, and should be, engaging.
All lifetime mortgage products provide the option to make interest payments during the life of the plan, but advisers and their clients can now tap into products which reward customers with a reduced interest rate in exchange for committing to making payments for a fixed term, such as our Apex Interest Reward product, and alternatives offered by the likes of Standard Life Home Finance, Just, Pure, and Legal & General.
These products effectively serve as a real bridge between the mainstream and the traditional lifetime mortgage, spanning the gap that previously existed, not just for borrowers, but for advisers who need to provide more specialist advice for every single client who is over 50/55 and now has access to these options.
Also where the market was once dominated by products with lengthy early repayment charges (ERCs), more2life has led the way in establishing alternatives with short ERC periods, and in the case of our groundbreaking Maxi Zero ERC, no charges at all.
A change of thinking
Despite this progress, I’d argue the way we view later life lending still needs to evolve quickly if we are to truly make the most of these products.Providers have embraced the need for innovation, and specialist later life advisers have expanded their range of options, but we aren’t seeing enough mainstream mortgage advisers following suit.
For too long there has been an impression among some that later life lending products are only really an option for clients who have already retired, from those who might have recently given up work stretching to those far later in life.
But times are changing. Increasingly providers are creating products that are actively designed to serve younger borrowers. We have a host of products available to those aged over 55, there are now later life lending options for those aged over 50, and so as a sector, we are able to offer products for suitable borrowers who are still happily working, are able to make monthly interest payments, but who want to unlock some of the equity in their home.
As an industry, we need to do a better job in supporting advisers with this change of thinking, so that whenever there is a client over the age of 50, later life lending products are actively considered alongside mainstream mortgages, RIOs and the like.
Doing our (Consumer) Duty
One of the most obvious drivers for advisers engaging more with later life lending is the Consumer Duty. The regulator’s focus on positive outcomes for customers means advisers need to go further in demonstrating all of the possible options have been given adequate consideration.But there are other, tangible benefits open to advisers who embrace later life lending not just in terms of meeting a range of regulatory measures. The growth of product transfers has had a detrimental impact on the bottom line for mainstream advisers since the proc fees involved don’t reflect the work being undertaken. The adviser might have to conduct multiple appraisals due to product rate changes but end up back at the existing lender, having to accept a grossly unfair, lesser proc fee from the vast majority of lenders.
Yet later life lending products not only represent a better option for a growing number of this cohort, they also deliver proc fees that actually reflect the work being undertaken. Ensuring later life lending is included in the advice process with over 50/55 clients is not just better for them, it’s better for advisers.
The direction of travel
Let’s be clear, the number of borrowers who are suitable for these products is only going to grow. Utilising housing equity earlier will become more acceptable and accessible, and married with the ability to keep on paying the interest, makes this a much more attractive option. Plus it provides a product route map from the mainstream, through these new products to traditional lifetime mortgages.Whether it’s managing their existing debt, funding lifestyle needs, or simply helping family by providing an early inheritance, there is no shortage of compelling reasons for tapping into that equity.
The later life lending market is already worth around £20 billion a year, with traditional lifetime mortgages accounting for around 10% of that. As these new innovative forms of lifetime mortgage become more commonplace, as advisers add them to their service range, they are only going to represent a bigger slice of the pie.
Everyone benefits – clients get access to a new modern range of later life lending products that better meet their needs, while advisers get property remunerated for the work they carry out. Advisers who aren’t already including these products in their toolkit need to ask themselves, if not, why not - and if not now, then when?
First published: The Intermediary
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