Later life mortgage lending falls by 7%

29th November 2021

Latest figures from UK Finance have shown that new later life mortgages dropped 7% in Quarter (Q3) 2021.

The figures showed that there were 44,130 new later life mortgages in Q3 2021, with total lending in the quarter of £6.46 billion. This represents a 7% decrease in mortgage volumes compared with Q2 2021, but a 6% increase compared with volumes a year earlier.

The overall quarterly reduction was a result of declines in the number of mortgages taken out by those aged between 55 and 69, which reflects lower house purchase volumes in the wider housing market, coincident with the unwinding of the stamp duty holiday.

Lending to older borrowers (those aged over 70) was stable, as these borrowers access the market primarily through products that are not related to house purchase (e.g. equity release products).

Whilst Retirement Interest Only (RIO) mortgages, which were launched in 2018, started to grow in popularity in 2021 as more borrowers entered the market. Volumes are low compared to other later life products which is due in part to challenges for many borrowers in meeting the affordability requirements for a RIO mortgage. While it can be difficult for borrowers to switch from an interest only mortgage to a RIO mortgage, RIOs are still an alternative product to lifetime mortgages. Lenders are providing these products where a lifetime mortgage may not be the best fit for the borrower (e.g. when the customer is looking to borrower at slightly higher LTVs).

Lifetime mortgage volumes have remained modestly lower than prior to the Covid-19 pandemic, but this reduction is expected to be temporary as the uncertainty driven by the pandemic subsides.

Charles Roe, Director of Mortgages at UK Finance said “Following the end of the stamp duty holiday, mortgage lending to over 55s declined seven per cent in Q3 compared to the previous quarter, mirroring the wider market. However, there was a slight rise in lending to those aged over 70 as people sought to release equity in their property rather than moving home.”

“Our focus on retirement interest-only (RIO) mortgages shows they have grown in popularity since their launch in 2018. These products provide a good alternative for customers where a lifetime mortgage may not be the best fit, however, take up is lower than other later life products due to affordability.”