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Later life lending falls sharply in Q4 2023

Later life lending falls sharply in Q4 2023
Anna Sagar
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Anna Sagar

Around 29,060 new loans were advanced to older borrowers in Q4, a decrease of 37% year-on-year (YOY), with total lending coming to £4.1bn.

According to UK Finance, the latter is down 42% compared to the same period last year.

The report continued on to say that there were 6,710 new lifetime mortgages, a decrease of 40% compared to the same period last year.

The value of lifetime mortgage lending stood at £520m, which is down from 57% compared to Q4 2022.

In Q4 2023, there were 222 retirement interest-only (RIO) mortgages advanced in Q4, down 43.3% YOY.

The value of RIO lending came to £26m, a fall of 38% on the same quarter last year.

The residential later life loans in Q4 made up 7.4% of all residential loans, and buy-to-let (BTL) later life loans accounted for around 22% of all BTL loans.

Later life lending figures in line with expectations

Jim Boyd, CEO of the Equity Release Council (ERC), said: “Today’s later life lending figures from UK Finance echo the challenges that we have seen across all residential property markets, including equity release. Rising interest rates saw activity slow in 2023, with customers and their advisers taking a cautious approach to borrowing and putting off these types of bigger decisions.

“However, anecdotal evidence suggests that we have seen a more positive start to 2024 as customers consider their options and start to acclimatise to the current higher-interest-rate environment. Many people are relying on their property wealth to retire in comfort, and we are focused on ensuring they can access it confidently and securely.

“Whether the customer wishes to top up their pension, support their family or manage their borrowing in retirement, today’s products offer more flexible options to help manage costs, with voluntary repayments baked into every new plan. Ultimately, it is about choice, and it is vital that people plan carefully for the future and only commit to long-term products after careful consideration, expert advice and consulting with loved ones.”

Paul Saroya, director at Viva Retirement Solutions, said that the data disclosed was “very much in line with expectations in the market”.

“The mini Budget has had a prolonged impact on the market and, although we hope for growth this year, it very much depends on many external factors. What we do know is that the pent-up demand is building and that the market will surpass previous “best” levels, we just do not know when,” he explained.

Simon Webb, managing director of capital markets and finance at LiveMore, said that the figures were “indicative of our still-turbulent market” as, despite an ageing population and improved product choice, there was still a sharp drop in loans.

“That said, borrowing was unusually high following the 23 September 2022 stamp duty increase to thresholds, when the over-55s realised they could tap into the equity in their property,” he noted.

Webb continued: “When we see these types of figures, it rings alarm bells about the potential increasing number of mortgage prisoners in the UK. Interest-only mortgages can help mortgage prisoners who can’t meet affordability criteria, as well as those with interest-only mortgages due to mature but with no repayment plan in place.

“Without suitable products, these two groups of customers would otherwise have to sell up or pay very high interest rates.”