When we speak to new brokers, one of the most common things we hear is ‘Wow! I didn’t know you did that!’
Used to the ‘computer says no’ response from mainstream lenders where their more complex cases don’t fit ridged lending criteria, our flexibility can be an eye-opener due to our manual underwriting approach and flexibility.
Lending to borrowers in later life with complicated income streams isn’t always straight forward, but being able to look at each application on a case-by-case basis makes a huge difference. Brokers not familiar to our approach are often very pleasantly surprised when we say; Yes, can lend to 95 years old. Yes, we can take into account up to 90% of pension pots or investment for affordability. And yes, we’ll consider earned income up to age 75!
A positive outlook
UK Finance data showed a resilient and strengthening market for later life lending with consistent quarterly increases throughout 2024. Lending to the over 55s in Q3 2024 rose to £5.2bn, up 9.7% compared to the same quarter a year previously, and up 20.9% compared to Q1 2024.
The election, the first budget of the new Labour Government and the Bank of England’s decisions around interest rates will no doubt have delayed decision making as they wait for the ‘dust to settle’, and there is reasonable amount of confidence for a more buoyant market in 2025.
UK Finance forecasts gross lending for the whole mortgage market to grow to £260bn, up 11% on 2024, and with an ageing population the later life market is an ever-growing sector. However, although affordability challenges are easing, they continue to impact both homebuyers and those looking to remortgage, and interest rates are still relatively high.
A changing landscape
Later life is one of our main lending areas at Family Building Society and one in which we have many years of experience. Many of the clients that come to us are in their mid-to-late 60s or early 70s who have come to the end of their term with their high street lender who will not extend their term into retirement.
Often their income has reduced, possibly due to bereavement or a ‘grey divorce’. There are also older borrowers who are unencumbered but looking to gift money to family members, invest in a second home, or do some home improvements in their current property.
With more flexible criteria and a broader product range available to older borrowers, traditional mortgage options are far more attractive than equity release, and UK Finance data confirms this.
The value for lifetime mortgages in Q3 was down -8.9% YoY (standard residential mortgages to over 55s were up 14.0%). We’re seeing this trend bear out at Family Building Society, with a marked uptick in later life borrowing.
How can we help your clients?
At Family Building Society, our strength is our personal approach to lending – through manual underwriting and a team of Business Development Managers (BDMs) who are always on hand to answer any queries – backed by generous and flexible lending criteria and innovative products.
- Our approach
Our team of BDMs cover the whole of the UK so brokers always have a personal contact they can speak to. The close relationship between our BDMs and underwriting team is so important when dealing with complex cases, as applications can be discussed before submission.
If a BDM can’t agree a case straightaway, they can discuss it with an underwriter who potentially may be able to agree an exception. This speeds up the process and adds a human touch which mainstream lenders are unable to offer.
- Flexible criteria
Our generous criteria allows borrowers flexibility and we lend in retirement with higher maximum ages than most lenders:
- Owner Occupier repayment mortgages, up to a maximum age f 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 take into account earned income up to the age of 70, or even 75 if the client is in a non-manual role.
We can consider a wide range of unearned income including rental income, state and private pensions, pension pots and investments. The unique way we treat investments and pension pots is perhaps the most surprising.
We can consider up to 90% of the value in a pension pot divided by the full term of the mortgage and use that as an affordability measure. For example, if a client has £500,000 in a pension pot, we can take 90% of that (£450,000), divided by a 10-year term, providing £45,000 as income on the application. The key thing is they do not have to draw from their pension pot, so it’s a great way of monetising an asset.
- Joint Borrower Sole Proprietor
We’re seeing an increasing trend of older borrowers wanting, or perhaps needing, to help family members financially. With tougher affordability, high interest rates and increasing property prices, getting onto the property ladder is harder than ever for younger borrowers.
One of our standout products is our Joint Borrower Sole Proprietor (JBSP) arrangement which allows multiple applicants to support a mortgage application without being named on the property deeds. Up to four incomes can be used for affordability – one or two borrowers (who will own and occupy the property) can be supported by up to two other family members.
A great benefit of this is that supporting family members will not be liable for stamp duty on a second home. Last year, we broadened the family members who are able to support the mortgage to grandparents, aunt, uncles and siblings.
We also offer JBSP in reverse – enabling children to help their parents if they’re struggling to meet affordability, or no longer have the income to support their repayments, possible due to a death or separation. This can allow parents to stay in their much-loved family home for longer.
At Family Building Society, we don’t have a separate product set for older borrowers – whether a client is 25 or 85 we’ll treat them exactly the same, and they can have any of the mortgage products in our range.
Come and talk to us
Our approach can be delightfully unexpected. We take great pride in the how we do things, and it works. Speak to your local BDM and see how we can say ‘yes’ to your clients.
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.
