Building societies are to review their maximum age limits for mortgage borrowers to help support those needing mortgage finance heading towards and in retirement. It is one of nine recommendations in a new interim report released today by the Building Societies Association.
It is estimated that around a quarter of the population will over 65 by 2034. This shift in population ages and needs means people are increasingly looking to fund mortgage borrowing into retirement.
People are also tending to buy later and go for longer repayment terms as a result of factors such as student debt, divorce and the abolition of the default retirement age.
Other recommendations include:
The availability of suitable housing options for older home-owners who want to move to a property that meets their changing needs – making it an aspiration not a chore.
Better cross-departmental co-ordination to rationalise government policy on the treatment of older borrower’s housing wealth.
Delivery of regulation that encourages innovation.
The provision of clear information that empowers older consumers.
Working with insurers to develop policies that enable lenders to mitigate the different risks involved in lending to older borrowers.
Improving the availability of holistic financial planning in retirement.
The formation of a cross-industry alliance with other bodies focused on the needs of older consumers.
Working towards a mortgage which adapts to the different stages of a person’s life.
Dick Jenkins, chair of the BSA, said: “We have been working together as a sector to look at this issue and we are making some early recommendations for change today. Some put the ball firmly in our court; others can only be delivered in partnership and a few may require regulatory change.
“The FCA has been involved in this preparatory work and I’ve been impressed with their open-minded and participatory approach. We have also sought the views of many others and these will now contribute to the next stage of the project, to deliver progress for those who want, need and deserve to buy a home of their own into and in retirement.”
Dean Mirfin, technical director at Key Retirement, said: “Advice and innovation are crucial to addressing the growing demand for lending into retirement and it is encouraging to see building societies taking up the challenge.
“One of the key points made in the report is that ‘lending close to or in retirement is not always riskier – just different’, and the report recognises how lifetime mortgages can make a major contribution highlighting how customer needs change as people get older. Capital and interest mortgages are suitable when people are working but as they retire the ability to switch to interest-only or be able to withdraw equity becomes more important.
“Customers will always require quality advice and at the right point in time. Fulfilling the journey outlined in the report will also require different types of funders to collaborate more on the stage solutions.”
Earlier this week, the UK financial regulator warned that the mortgage sector could come under strain unless it adapts to the needs of a rapidly aging population.
Jonathan Davidson, director of retail supervision and authorisations at the Financial Conduct Authority, said that as the population becomes older there will be increasing demand for a broader range of products to meet their needs.
He pointed towards the increasing number of retired people already taking out new mortgage products.
“Now people aspire for their home to provide finance for the long term, pay for a deposit for their children and grandchildren, and inheritance. Sometimes all simultaneously.
“There is, I believe, the opportunity for a flexible range of products that work around people’s lives as well as the underlying asset,” Davidson said.
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