Now that people are living longer in retirement and first-time buyers tend to be much older, advisers are likely to find their clients will increasingly start to have more demanding later life mortgage needs.
Knowing how to deal with these types of conversations, which may involve vulnerable clients, will be important for advisers.
It is also a reflection of how the industry is changing.
David Hollingworth, associate director, communications at L&C Mortgages, recalls: “Older borrowers became frustrated at the lack of mortgage options open to them, after criteria tightened following the Mortgage Market Review’s increased scrutiny of lending into retirement.
“Lenders would continue to allow lending beyond expected retirement age but generally tightened their requirements around maximum age at the end of the mortgage term, often to 70 or 75.”
He acknowledges: “Criteria is now easing and the advent of retirement interest-only mortgages means that borrowers have a broader range of options to take them into later life where that’s appropriate.”
Older aspirations
What are the needs of these types of mortgage borrowers likely to be?
Damian Thompson, director of mortgages at Aldermore, observes the Baby Boomer generation is likely to have very different aspirations in their later years than previous generations had, particularly as they are living longer, healthier lives.
He says: “Some of these ambitions may require a boost in equity, such as household renovations after the kids have moved out, supporting the next generations of their family to get on the housing ladder, or help through higher education, assistance in beginning business ventures – or just simply looking to enjoy a more comfortable lifestyle.
“In addition, there are a proportion of homeowners who are approaching the end of their interest-only mortgage term and do not yet have a method of repayment but want to stay in their homes.”
He recognises: “These needs are diverse in nature and require multiple solutions to cater to individual circumstances. The lending industry has perhaps been slow to react to this change but now it is beginning to change rapidly.”
There is certainly a range of mortgage products now available to older borrowers, as documented in feature one of this guide.
Education and awareness
But what do advisers need to bear in mind when dealing with clients who are likely to be older and may also be considered vulnerable, and who have later life mortgage needs?
Mr Hollingworth points out one of the main issues for these borrowers will be affordability.
“They will need to be able to demonstrate that they have adequate income to cover the mortgage – not just now but in the future as well,” he adds.
“That’s quite different to the option that a lifetime mortgage would open up to the homeowner, where no monthly payment would be required. A standard mortgage, or retirement interest-only product, will eat into their monthly income as a result and is likely to be key to their decision-making around product type.”
