Later life lending falls 16.9%

UK Finance has published its latest data on later life mortgage lending for Q2 2024 which reveals that there were 5,610 new lifetime mortgages advanced in the Quarter, down 16.9% year on year.

The figures show 32,990 older borrowers (aged 55 and over) took out mortgages in Q2 2024, up 8.34% in a year, 8,670 of these were for borrowers aged over 65.

The value of this lending was £470 million, which was down 6% compared with the same quarter a year previously. The data also shows there were 326 retirement interest only mortgages advanced in Q2, up 23% year on year. The value of this lending was £30m, which was up 15.4% compared with the same quarter a year previously.

The overall value of this lending was £5 billion – up 17.5% compared with the same quarter a year earlier. 11,420 of these were buy-to-let mortgages, 16,286 were residential and 5,610 were lifetime mortgages (equity release).

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “The latest figures have shown a 17.5% downturn compared to the same quarter in 2023 and continues the downward trend that started in the latter half of 2023. This is concerning for both older borrowers and the housing market as a whole. This decline suggests that many older homeowners are facing increasing challenges in accessing the finance they need to support their later years.

“This decline is particularly worrying considering our ageing population, with over 20 million people currently over 55. Interest-only products can be a lifeline for these individuals, but it is clear from these figures that many are unaware of their eligibility and options. This not only limits their financial flexibility but could also exacerbate issues like pension shortfalls or the ability to cover unexpected expenses.

“For lenders, this is a crucial moment to reassess how we can innovate and adapt to meet the evolving needs of an aging population, ensuring they are not left in a financially vulnerable position. At LiveMore, we remain committed to working closely with borrowers and financial advisers to provide solutions that are tailored to the unique needs of older homeowners.”

Helen Morrissey, Head of Retirement Analysis at Hargreaves Lansdown said “The face of retirement is changing – surging property prices means fewer of us are getting onto the property ladder and those who do are getting on later. It’s not a trend that can be blamed on a failure of our financial planning – the fact is property prices have risen much more strongly than many of our savings and unless you’ve been able to squirrel away a decent nest egg or have the support of family then raising that all important deposit is extremely difficult.

“At the same time, life isn’t always straightforward, and even when you have bought a place of your own, you can face setbacks along the way, like divorce, which can mean having to start all over again, years down the track. This means ever-growing numbers of us are going into retirement carrying housing costs and this weighs down our retirement planning.

“The latest data from the HL Savings and Resilience Barometer estimates the cost of a moderate retirement at £25,000 per year for a single person and £36,480 for a couple. However, these estimates don’t take account of housing costs so the reality is that if you enter retirement repaying a mortgage then you will need much more – at least until you can get the mortgage paid off. It’s a reality that we need to grasp quickly and prepare for.

“There are a variety of options you can consider. You can save extra into your SIPP over the long term so that the extra income can cover the costs. In this case, taking the opportunity to boost your contributions every time you get a pay rise or new job can be a good way of doing this fairly painlessly. It’s also important to make the most of your employer contribution – if they are willing to contribute more if you increase your own contribution then this can make a huge difference to how much you end up with.

“You can also choose to overpay your mortgage in the run-up to retirement or else save into another vehicle such as a stocks and shares ISA to make your money work harder so you can pay the mortgage off.

“Downsizing is another option considered by people approaching retirement with a hole in their retirement planning. This may seem a good option in theory, but the reality is that the closer to retirement people get the less likely they are to want to pack up and move. Our most recent research shows that a quarter of people aged between 18-54 said they would consider downsizing at some point but this declines to just 16% of the over 55s. It’s a case that the older we get the more attached we get to a home where we may have brought up a family. People are also reluctant to leave family and friends to live somewhere else.”