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'Ageing population is putting a strain on later life lending model' - IMLA

Homeowners are ageing at a faster rate than the UK population as developments in post-retirement lending put a strain on the current model of financial advice, according to Intermediary Mortgage Lenders Association (IMLA).

Its report ‘Developments in later life lending to an ageing population’ highlights the need to serve a growing population of older homeowners is producing a new generation of mortgage products.

The firm is calling on UK financial advisers to break offer a more holistic service to keep up with the pace of product innovation.

It notes that the number of over-65 homeowners has risen 52% in the last 20 years while this demographic in general has risen just 28%. In comparison, the UK population has increased by 28% over the same period, while the overall homeowner population has increased just 9%.

This means that homeowners over 55 now hold 69% of the UK’s housing equity, with retirees’ mortgage debt set to double by 2030.

Kate Davies, executive director at IMLA, commented: “Changing demographics and socioeconomic pressures mean it’s likely that later life lending will become a significant growth area for the mortgage industry.”

“As more retirees seek to stay in their homes or unlock equity, product innovation will drive lending forward and make it a bigger component of financial planning in retirement.”

The report also found that over 40,000 interest-only loans held by over-65s are due to mature each year between 2017 and 2013, with many requiring extended mortgage terms to stay in their homes through retirement.

With this, it’s no surprise that lifetime mortgage lending rose by 29% annually since 2014 as the industry has developed a range of capital repayment, retirement interest-only (RIOM) and lifetime lending options to meet the growing demand.

Improved features, such as partial repayments and drawdown facilities, allow these products to ‘soften’ the traditional divide between later life and mainstream financial products.

IMLA suggests that financial advice needs to evolve alongside this product innovation as the sector grows. It also notes that much more work needs to be done by guidance and advice on signposting retirees to better support decision-making.

“Our report finds that many retirees’ homes are worth as much or more than their pensions, and both elements need to be considered as part of a wider retirement plan,” Davies added.

“This creates challenges for those providing financial advice, many of whom will be expert in one area – pensions, investments or mortgages – but who will not necessarily have the qualifications or permissions required to advise across the spectrum.”

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