30 September 2023

Challenging the misconceptions around later life lending

By LiveMore

Four out of five people (78%) aged 50-79 have been impacted by the cost-of-living crisis and 19% of those don’t know how they are going to cope, according to a recent survey by LiveMore.

The biggest concern, cited by 65% of respondents, is not being able to pay vital bills.

One respondent told us: “Last winter I didn’t put the heating on, so the house was about 12 degrees. I sat in my lounge under a heated blanket because it was cheap to run, and my daughter was in her room fully dressed in bed, under the duvet. And this year we’re under more pressure financially than this time last year.”

To compound the challenge, 59% of older borrowers believe that financial services won’t help them through the cost-of-living crisis. LiveMore’s project, “The Cost of Living Over 50”, looks at the challenges facing older borrowers during this crisis, and what brokers can do to help.

There is a lifeline

Later life lending could be a lifeline to many people affected by the cost-of-living crisis, but there are myths around it which can often put brokers off entering the space. Let’s explore some of them:

“Brokers need special qualifications for later life lending”

Some brokers are unsure if they need additional qualifications to work with people in retirement – but this is only the case for lifetime mortgages (equity release).

There are plenty of options for borrowers over 50, such as interest only, retirement interest only and good old fashioned standard mortgages that a qualified broker can advise on.

However, if you did want to advise on lifetime mortgages, there is an extra qualification on top of CeMAP (or equivalent) - the Certificate in Regulated Equity Release (CeRER).

At LiveMore we are strong advocates of every borrower undergoing a full affordability assessment before any decision is made on which type of mortgage to choose. That may sound obvious, but some people go straight to equity release without even considering standard mortgage options.

More brokers moving into the later life space from mainstream will help to set a new standard for finding the right solution for older borrowers.

“Equity release is the only option for over 55s”

Many borrowers think equity release is the only option for them once they hit a certain age. As an industry, it’s our job to educate them that equity release is just one option, and it’s not always the right one.

Standard mortgages are often more suitable than equity release, however, research undertaken by the Financial Servies Consumer Panel in March 2022 concluded that many over 55s think equity release is their only option.

The report said: “There is a widespread belief that, at this time in their life, there may be no viable alternative financial solution due to a combination of age, life stage, credit history, lack of financial buffer, health and wanting to remain in their home.”

Brokers also have misconceptions, and one had a strong view on this, telling LiveMore: “I don’t think that mortgages are understood enough – even by mortgage brokers - most are just order takers. They don’t do financial planning so are the wrong people to be doing equity release.”

“Later life isn’t a big opportunity”

“There isn’t a lot of business to be done in later life” commented one broker, “I only do the odd case so it’s not worth it,” said another and this sentiment is reflective of the industry in general.

But the drivers behind why it is worth brokers learning about later life products are wide reaching. We have an aging population and there is a cost-of-living crisis with people struggling financially.

Later life mortgages can also help interest-only borrowers coming to the end of their mortgage term and unable to pay back the capital, a market estimated to be worth around £200bn. More people are retiring with a mortgage and there are tens of thousands of mortgage prisoners.

There are also those who want to free up some of the equity in their home. The bank of family grew again last year, with Legal and General reporting £8.1bn of gifting from parents and grandparents this year, with that number predicted to rise to £10bn by 2025.

“It’s hard to source later life products”

This has been the case in the past, but things are changing. For example, at LiveMore we’ve built the technology to make it easy to find the right solution for over 50s borrowers

Our affordability calculator tells you the maximum borrowing your client can achieve across our range – from interest only, capital and repayment through to lifetime mortgages.

If the client does not pass the affordability assessment at this stage, LiveMore’s technology will identify a list of alternative products which the client is able to afford, ensuring that there is a solution in 93% of cases.

What was once an opaque process is now becoming simpler for brokers to help their older clients with confidence.

What can I do as a broker?

Brokers who avoid later life selling or refer clients to equity release specialist advisers are increasingly missing out on a growth opportunity. In many cases, a mortgage may be possible, and a full affordability assessment is the key to finding out.

For brokers with ambition, later life lending is a growing market and with the cost-of-living crisis deepening, now is a great time to learn about it and start preparing for new opportunities. Consider these next steps:

  • Take the CeRER qualification - To offer holistic advice, you could consider studying for the CeRER qualification. Even if you do not see many older borrowers now, you may be likely to in the coming years, so preparation now could well be a good investment for your future career

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.