With the life expectancy of the UK population increasing by five hours a day*, the building society sector has committed to review its maximum age limits for mortgage borrowers, as one way to better support those needing mortgage finance into and in retirement.
This action is one of nine recommendations contained in an interim report entitled Lending into Retirement,
launched today at the BSA Annual Lunch. The report reflects a major societal shift as our population ages and needs increasingly to fund mortgage borrowing into retirement.
The UK already has 11.6 million people over the age of 65. By 2034 it is estimated that around a quarter of the population will be 65 plus. At the same time a potent mix of other factors: From house prices to student debt; the divorce rate to the abolition of the default retirement age, mean that consumers are tending to buy later and go for longer repayment terms.
BSA research shows that around half of 25-34 year olds think they will need a mortgage that lasts into retirement. The average age of an unassisted first time buyer has already hit 31.
The remaining recommendations cover a range of areas:
1. The availability of suitable housing options for older home-owners who want to move to a property that meets their changing needs – making it an aspiration not a chore.
2. Better cross-departmental co-ordination to rationalise Government policy on the treatment of older borrower’s housing wealth.
3. Delivery of regulation that encourages innovation.
4. The provision of clear information that empowers older consumers.
5. Working with insurers to develop policies that enable lenders to mitigate the different risks involved in lending to older borrowers.
6. Improving the availability of holistic financial planning in retirement.
7. The formation of a cross-industry alliance with other bodies focused on the needs of older consumers.
8. Working towards a mortgage which adapts to the different stages of a person’s life.
Commenting on the launch of the Lending into Retirement report, Dick Jenkins, Chair of the BSA said:
“We have been working together as a sector to look at this issue and we are making some early recommendations for change today. Some put the ball firmly in our court; others can only be delivered in partnership and a few may require regulatory change.
“The FCA has been involved in this preparatory work and I’ve been impressed with their open-minded and participatory approach. We have also sought the views of many others and these will now contribute to the next stage of the project, to deliver progress for those who want, need and deserve to buy a home of their own into and in retirement.”
BSA Head of Mortgage Policy, Paul Broadhead added:
“It is natural for the building society sector to kick-start and lead this work. We already tend to have a more flexible approach to lending with higher and sometimes no age limits and a willingness to assess applications considering an individual’s circustances.
“As the average age of a first-time buyer continues to increase, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending. This report identifies a number of areas that need further attention if we are going to meet the inevitable growth in demand for borrowing into, and in, retirement. The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK.”
BSA Head of External Affairs
020 7520 5926
Notes for editors
The Building Societies Association (BSA) represents all 44 UK building societies. Building societies have total assets of over £330 billion and, together with their subsidiaries, hold residential mortgages of nearly £260 billion, 20% of the total outstanding in the UK. They hold almost £240 billion of retail deposits, accounting for 18% of all such deposits in the UK. Building societies account for about 29% of all cash ISA balances. They employ approximately 40,000 full and part-time staff and operate through approximately 1,550 branches.
*Five hours a day: systemic innovation for an ageing population, Nesta, 2013