Following the Bank of England’s first rate cut in four years, intermediaries are feeling a lot more optimistic about the future of the lending market. This sentiment was reflected in the results of a survey we carried out at Family Building Society last month, where nearly two thirds of Intermediaries (64%) reported an increase in mortgage enquiries and a 56% increase from those wanting to move. In the later life market in particular, data from UK Finance shows that the value of new loans increased by 17.5% year on year for Q2. And this buoyancy is expected to continue with most lenders expecting business levels to increase over the next six months.
This growth is being driven by many factors – an aging population, the cost-of-living crisis and many lifestyle changes. In particular, our survey highlighted the ongoing need for first time buyers to be supported by parents and grandparents.
At Family Building Society, we’re seeing an ever-increasing trend of older borrowers using the equity in their home as a gift or loan to help younger family members onto the property ladder. 70% of respondents from our survey commented that the desire for young people to get onto the housing ladder is as strong as ever, with many noting an increase in enquiries about using the support from the Bank of Mum and Dad and other family members. Legal & General’s recent research showed that the Bank of Family reached record levels in 2024 with £9.2bn being gifted, up from £8.1bn in 2023. Their research showed that one in five first time buyers have to delay their home purchase by more than five years, while 1 in 10 first time buyers would not be able to buy at all.
Many intermediaries in our survey also felt that certain ‘would be’ borrowers are underserved by lenders, especially those coming up to and in retirement.
How can we help older family members?
Many of the clients that come to us are in their late 60’s or early 70s and have come to the end of their mortgage term with another lender. Some are unencumbered but want to release equity from their home to finically support their children or grandchildren. They struggle to borrow with high street lenders simply because of their age.
The way we look at later life clients differentiates us and that’s why we see so much business in the later life lending space.
- Higher maximum ages than most lenders
We have higher maximum ages than most lenders and can lend up to 95 at the end of term for Owner Occupier repayment mortgage, and up to 89 when the loan commences for Owner Occupier Interest-Only and Buy to Let mortgages. This not only allows those older clients needing to remortgage themselves, but also allows them to use the equity in their home to help younger family members, as longer mortgage terms can make monthly payments more affordable.
- Income
Many older borrowers are turned away from high street lenders who have a ‘computer says no’ approach because their income isn’t straightforward. Income in retirement can indeed be complex, but at Family Building Society we have a different approach and can accept a wide array of income streams.
One of the biggest differences is the way we consider pension pots. Many lenders will take a percentage of a pension pot, typically 3%, and assume this as an income. However, some will not consider pension pot income at all if it’s not already in drawdown. At Family Building Society, we can take up to 90% of the value of a pension pot and divide it by the proposed mortgage term.
For example, take a £500,000 pension pot. 90% equates to £450,000. The customer might be looking for a 15-year term, allowing us to calculate a £30,000 income from the pension pot, which makes it affordable.
Another example is of a 74-year old who needed £300,000 to settle his divorce. His son joined the mortgage, allowing his father to carry on living in the property. The father did not have enough pension income, so his son became a joint applicant. We arranged the loan on an interest-only basis over 13 years, relying on the father’s state pension, private and other pension pots, and the son’s earned income.
Income from investment portfolios, stocks and shares ISAs, other ‘unearned’ or passive income streams such as rental income, state pension and any other annuities can be added to the assumed income. Remuneration drawn by limited company directors also qualifies.
- Improved criteria for family support
L&Gs recent research into the Bank of Family, showed that family support is widening with 13% of financial assistance coming from grandparents and 27% coming from wider family and friends. This mirrors what our Business Development Managers are seeing on the ground and the reason why we recently improved the criteria for our Joint Borrower Sole Proprietor (JBSP) mortgages – extending family members who can support the mortgage from parents and grandparents to include also aunts, uncles and siblings.
Our JBSP mortgages are designed to enable family members to help support each other with affordability when applying for a mortgage. One or two owners, plus up to two family members, can join the mortgage to support the borrower, with the major benefit of stamp duty only requiring to be paid by the owner of the property only, and not by all the mortgage applicants.
We can also reverse the traditional scenario and allow adult children to support their parents, allowing them to stay in their family home for longer. Rates can be found that are as competitive as standard mortgages.
A reminder of how we can help:
- We take into account earned income up to the age of 70, or even 75 if the client is in a non-manual role.
- We’ll consider pension pots, as well as fixed pensions, investment and rental income. Other income can be considered on a case-by-case basis.
- We lend in retirement with higher maximum ages than most lenders:
- Owner Occupier repayment mortgages, up to a maximum age of 95 at the end of term.
- Owner Occupier Interest-Only and Buy to Let mortgages, up to a maximum age of 89 when the loan commences.
- We have a common sense approach to lending and use human beings, not robots, to underwrite each case. This means we can tailor our solutions to each of your client’s needs.
This is how we, at Family Building Society, underwrite our mortgages. Case by case, story by story, so we can be flexible and help to use borrowers income, pensions and investments in the best way to improve affordability.
We take great pride in the how we do things, and it works.
To contact our Mortgage Desk or your local BDM,
CALL US ON: 01372 744155
OR EMAIL: mortgage.desk@familybsoc.co.uk
FAMILY BUILDING SOCIETY, EBBISHAM HOUSE, 30 CHURCH ST, EPSOM, SURREY KT17 4NL
Family Building Society is a trading name of National Counties Building Society which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. National Counties is on the Financial Services Register Firm Reference Number 206080.
