We caught up with an industry partner and friend of Personal Retirement Planning, Jo Wilson from Legal & General Home Finance, to talk about later life lending.

Jo, please tell us about your career background and your role at Legal & General Home Finance

I have been in the later life lending industry since 2003, helping to develop a lifetime mortgage business from scratch which was acquired by Legal & General in 2015 to become Legal & General Home Finance. Some 21 years later, seeing how our products can transform people’s lives, is still special. 

In my role as Business Development Manager I work closely with many of our top accounts and smaller ones too, to help them grow their business, providing product training to ensure they have the specialist knowledge needed to advise their clients on the suitability of our range of later life mortgages

I strive to achieve the best results for my advisers and their customers, and always ask myself the same question: ‘how would I feel if this customer was my Mum or Dad’?

How would you describe the current state of the later life finance market?

The later life lending market in 2023 was no different to the mortgage market. We saw rising interest rates slow down activity, with customers and their advisers taking a cautious approach. Loan sizes were lower and there was less borrowing for more aspirational reasons.

The lifetime mortgage market in particular has matured hugely in recent years. New consumer protections and product features, such as the ability to be able to manage the debt by making regular or ad hoc repayments and the option to take out inheritance protection at the outset, to name just a couple, mean we are well positioned to serve the inevitable demand that will come as confidence returns. 

Clearly some customers are holding out for future rate cuts but with no timescale as to when rates will reduce or how sustained this will be, older homeowners will need to continue to consider what is right for their individual circumstances. Many people are relying on their property wealth to fund a comfortable retirement and they should be confident that by using advisers and providers who are Equity Release Council members that they can release their equity securely.

It is so important that people have the ability to choose and plan carefully for the future and only commit to long-term products after careful consideration, expert advice by advisers who can consider or signpost them to all suitable options and discussing with family.

What borrowing trends are you seeing? What are the most popular reasons why homeowners are tapping into their property wealth right now?

Over half of our customers used our lifetime mortgages to make home improvements in 2023; making changes to future-proof their property ready for later life.

The ‘improve rather than move’ trend is something we may see continue in 2024, following the uncertainty in the housing market in recent years.

In addition to home improvements, customers took out lifetime mortgages to help get their finances in order. This includes debt consolidation (21%) and paying off mortgages (26%). 

Customers taking additional drawdowns, however, were more likely to use the value from within their homes to help supplement their income (23%).

We’re also seeing a continuing rise in our lifetime mortgages funding Bank of Family, particularly helping younger family members on to the property ladder / helping them with living costs and even divorce. 

The lending industry has got off to a positive start so far this year, what do you think the rest of 2024 has in store for the later life market?

As we look ahead to the rest of 2024, we anticipate a renewed interest in lifetime mortgages as customers reconsider using property wealth as the market stabilises.

It’s worth bearing in mind that house prices are still significantly higher than pre-pandemic figures (18% up from the end of 2019), so property still represents an important asset which homeowners are increasingly likely to draw on.

We’re also seeing more innovation in the market, bringing a greater range of products, like our new payment term lifetime mortgage, to give a broader range of solutions to a wider pool of customers.

As for the drivers, the Bank of Family is impossible to ignore: General, support from parents, grandparents, and other family members reached record levels in 2023, helping 318,400 property purchases with an astonishing £8.1 billion worth of lending. We expect this trend to continue.

The value held in bricks and mortar will be the biggest asset for countless families around the country. That’s why more people are turning to their property wealth to help their younger family members ‘ladder up’ and buy their own homes.

Our Bank of Family research with Cebr found that one in five parents and grandparents aged over 55 will use their home to help fund their loved one’s property purchase, whether they are downsizing, re-mortgaging or turning to a lifetime mortgage to make that happen.

While the generosity of older family members is admirable and understandable, it’s important for people to speak to an adviser before making any big financial decisions, particularly to ensure they still have enough for their own retirement

And last but not least, Divorce. Divorce can be challenging and complicated, especially when it comes down to possibly the most emotionally invested asset, the home. However, our research shows that lifetime mortgages are providing a solution for eight per cent of separating couples, which we expect to continue in 2024
 
Of course, it’s a solution that can only be taken out after specialist financial advice, but our research suggests more couples could benefit from speaking to an adviser to ensure all assets are divided fairly.