As we approach the second half of 2025, most lenders will be reviewing how the year has progressed so far and where to focus their attention in the months to come.
Last year, the mortgage market remained subdued due to high interest rates and ongoing affordability challenges yet we at Scottish Building Society grew our mortgage portfolio by 7%. That growth remains a key objective of ours for this year too – as clearly evidenced by our recent decision to expand our lending geographically.
In June, we were delighted to announce that we are now lending beyond our traditional heartlands in Scotland and the North of England, to cover Birmingham, Oxfordshire, and the surrounding areas. Our decision to open up our offering to brokers based further south has been in direct response to the requests we’ve had from intermediaries we work with further north. This is testament to the growing need for more flexible finance options across the UK – even as the high street banks continue to battle it out on price as interest rates come down.
It’s tempting to overlook the fact that serving the broad range of homeowners and first-time buyers out there requires more than simply sticking a low rate product onto the shelf. From the conversations we have with intermediaries, a couple of basis points off a product rate or few hundred pounds less on a fee are far less important to the majority of borrowers than a lender working with them to find a way to approve their application.
Often this is because they find themselves outside the so-called “ideal” borrower profile for mainstream remortgage business. This is possibly the source of most frustration for brokers in today’s market (setting aside the endemic hold-ups in the conveyancing process that continue to challenge even the most patient of advisers).
Show me the ideal borrower profile? Employed with a stable salary. Maximum age at the end of the mortgage term 65. Guaranteed fixed or indexed pension income in retirement.
Brokers know, just as the rest of us do, that this is increasingly unrealistic – indeed, the ferocious competition between the big six lenders for this business that has them pricing below base rate on some products is all the evidence we need of that.
Where does that leave everyone else? It’s now normal to be buying your first home well into your 30s. The majority of those born in the 1980s or later move jobs every three to five years. Self-employment is trending up while having more than one source of income – even where a borrower is full-time employed – is becoming more and more normal.
Multiple pension pots accrue over the course of a career – their savings falling into defined contribution schemes which will leave them with a cash lump sum and variable investment income from a self-invested personal pension if they’re lucky.
With pressure on house price to income ratios still considerable in most places in the UK, mortgage terms of 25 years are less frequently sufficient. Terms up to 35 or 40 years are normal – taking the majority of borrowers in this position past the point of retirement by the time they can expect to have repaid their mortgage.
This calls for a more flexible approach to working with intermediaries to understand and assess a borrower’s income position – one that Scottish Building Society has long excelled at. Our expansion into the Midlands and further south to Oxfordshire means we can support more brokers and borrowers across England — particularly those who don’t always fit the standard approach.
Brokers have actively called for this move, recognising the value we offer – direct access to decision-makers, flexible underwriting, and a commitment to understanding the real-life stories behind every case.
This goes for older borrowers just as much as it does for first-time buyers. According to UK Finance, 35,840 new loans were advanced to borrowers in their 50s and 60s in Q4 2024 alone — a clear sign that later-life lending is no longer a niche but a growing need.
While solutions such as Retirement Interest-Only (RIO) mortgages and equity release have become part of the broker toolkit, they aren’t suitable for everyone. There is increasing demand from these pre-retirement borrowers who require a standard residential mortgage but struggle with affordability under conventional lending criteria.
This is where pension-backed lending can make a real difference – we can consider a borrower’s personal pension arrangements (SIPPs included) as part of the affordability assessment, even if the pension has not yet been drawn.
With total defined contribution pension assets (including SIPPs) now worth around £1.9tn, and Sipps alone valued at around £500bn, this is a significant untapped opportunity for both borrowers and brokers.
At Scottish Building Society, we’ve already seen the positive impact pension-backed lending can have. Take, for example, a couple in their mid-50s, asset-rich but with low income. By including their uncrystallised Sipp as part of our underwriting, we were able to provide the mortgage they needed — responsibly and sustainably.
As more clients approach later life with substantial assets but modest incomes, we believe pension-backed lending will become an increasingly important solution in the broker’s arsenal – it’s a solution for a problem that goes well beyond our heartlands.
Stephen Brown is head of intermediaries at The Scottish Building Society
