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Later life lending market worth £153.9bn

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The demand for equity release has risen in the last year, and it is expected to rise further.

The UK’s later life lending market is estimated to be worth up to £153.9bn, with £54.9bn of new lending and product switching taking place in 2021 alone.

According to the research paper by AKG Financial Analytics, commissioned by Key Group, over-55s have mortgage borrowing – standard, RIO and equity release – of around £99bn while annual new lending across all products is worth up to £14.9bn. Product switching is valued at a further £40bn a year.

The firms claim this is the first time the later life lending market has been “cohesively defined and outlined” which is a crucial step to deliver positive outcomes for those approaching retirement.

And, with the market expected to grow, the paper highlighted areas which need to develop in order to work for consumers. These include:

  • Greater education on if, when and how, property will play a role in their retirement planning.
  • Integrating the discussion on property wealth into retirement/decumulation processes.
  • Bridging the advice gap between standard mortgage and specialist later life lending advice as well as between siloed mortgage and investment advice.
  • Consider how the market will provide the ongoing training, qualifications and regulatory oversight required to support an increasing number of advisers looking to offer more holistic solutions.
  • Encouraging groups such as Citizens Advice and the Money and Pensions Service to develop their holistic later life lending – and wider property related retirement planning – support.
  • Further product development based on research and customer data/knowledge.

It comes as over half (51%) of mortgage advisers have seen an increase in demand for advice on later life lending in the past year and 58% expect a further rise over the next 12 months.

Over three-quarters (77%) predict a rise in demand over the next two to five years and 79% in the next six to 10 years.

Separate research also revealed that over a third (35%) of older homeowners welcomed the ability to borrow in later life.

‘Force to be reckoned with’

Simon Thompson, CEO at Key Group, said: “Today’s in-depth research paper clearly highlights that not only is the Later Life Lending market becoming a force to be reckoned with, but that customers, advisers, providers and trade bodies are keen to see it take its rightful place among the options people consider as they age.

“Equity release, retirement interest-only mortgages and standard mortgages taken out by older borrowers all have a role to play in helping people to achieve what they need and want in older age. As an industry, we need to step up to ensure that people can make their choices with confidence – comfortable in the knowledge that they are getting the best advice, products and support for their individual circumstances.”

Jim Boyd, CEO of the Equity Release Council, added: “This report not only outlines the challenges for the Later Life Lending market, but also the opportunities on the horizon and the significant role that equity release is set to play in tackling many of these issues.

“The sector is well placed to adapt to further future dynamic shifts such as the need to make older properties greener and the ongoing importance of intergenerational gifting. With equity release becoming ever more useful to a wider audience, the standards and safeguards we have established and continue to evolve will ensure that future generations of consumers can access products and advice of the highest possible calibre.”

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