Later Life Lending – Your Guide to the Market by mortgageintroducer

LATER LIFE LENDING YOUR GUIDE TO THE MARKET

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Contents

Staying robust in uncertain times

ollowing a diﬃcult year, many hoped for more certainty as we entered 2021, but unfortunately an air of uncertainty lingered. However, with a so far successful vaccination drive and Prime Minister Boris Johnson outlining a four-step plan to bring the country out of a national lockdown by June, there was a hopeful horizon ahead. The reality of this remains to be seen, but all industries and businesses have been given a degree of certainty to move forward. The later life industry remained robust through the pandemic, according to Key’s latest Market Monitor. Despite a diﬃcult Q2, the industry bounced back, with more than 40,000 plans taken out across the year. Just as the customer had to get used to virtual interactions and social distancing, their views towards the later life market also changed, with almost a third using equity release as a way to refinance a mortgage, and 18% using it to repay unsecured borrowing. With 2020 turning out to be a good year for rates, there is hope that 2021 will be a strong year for the sector. Both the Financial Conduct Authority (FCA) and Equity Release Council (ERC) have published guidance focusing on the customer in recent times. In December last year, the ERC’s Best Practice Guide was published, to complement its checklist for advisers and support firms when discussing and documenting customer needs. The FCA, meanwhile, published its final guidance for firms on the fair treatment of vulnerable consumers in February 2021. This aims to drive improvements in the way firms treat vulnerable customers so that they are able to achieve the same outcomes as others, and has been welcomed by the industry. With clear guidance and robust figures from 2020, the later life sector looks well prepared to deal with the changing nature of customer needs. When the national lockdown is finally lifted, this sector can confidently return to normal once again. Far from forgetting about the experiences of the last year, however, the later life market has learned some valuable lessons about working collaboratively and adapting in a crisis. Make sure to read about our Later Life round-table in this month’s issue of Mortgage Introducer, where panelists discussed the predicted level of success for RIOs, whether carrying debt has become a way of life, and the lessons of COVID-19. 

4 Feature: Later life remains robust Will Hale, chief executive officer at Key Retirement, reviews how the later life lending market fared in 2020 during difficult conditions 8 Interview: Later life lending is key in difficult times Mortgage Introducer speaks to Will Hale about plans for the future and the lessons learned from 2020 14 MAB: Specialist advice in a specialist sector Steve Humphries discusses why intermediaries must ensure they use the right systems, training and support 17 Legal & General: A prodict fit for tomorrow’s world Marie Catch considers the role of RIOs in offering flexible solutions to clients with evolving needs 21 Hodge: RIOs – A good thing? Wes Regis explains why RIOs are the specialist item in your toolbox, to be used when the customer and circumstances are right 25 more2life: Shaken, but not deterred Stuart Wilson looks at how the crisis has shaped consumer needs, and what the future might be for later life lending

Boost your later life lending potential with Air Group Find out more

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Feature

LATER LIFE MARKET REMAINS ROBUST Will Hale, chief executive oﬃcer at Key Retirement, reviews how the later life lending market fared in the diﬃcult conditions of 2020

he Key Market Monitor has been published quarterly for over 15 years, tracking the state of the market as it has matured, changed and – sadly on occasion – gone backwards. 2020 could have been one of those years when we took a significant step back, but while the volume and value of

plans taken out has fallen, the market has remained remarkably robust. STRONG PERFORMANCE DESPITE PANDEMIC

Let me explain. In Q2, as the initial impact of the pandemic was felt, the number of customers taking out plans fell to 8,374.

Source: Key Market Monitor

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Feature

Source: Key Market Monitor

The last time we had seen this modest a number of sales was in Q3 2016 (8,348), at a time when we recorded a total of 27,666 plans taken out across the entire year. However, 2020 proved to be very diﬀerent. While Q2 was extremely diﬃcult, the market bounced back and more than 40,470 plans were taken out. This was below the figures recorded in 2019 (45,717) and 2018 (47,081), but still comfortably above 2017 (38,955). What was driving this behaviour? Even with Brexit uncertainty, 2019 was a good year for the market, so we entered 2020 with a positive tailwind and performance in Q1 was good (11,495 plans). Then the pandemic truly became a reality as the country entered lockdown.

Systems and processes that are the bedrock of the equity release industry had to be reviewed. The question of how to provide face-to-face legal and financial advice became a topic of debate, as did the merits of remote versus physical valuations. Lenders were also struggling with moving significant swathes of their servicing teams to home working, and choosing – in some cases – to reduce →

“While the volume and value of plans taken out has fallen, the market has been remarkably robust”

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Feature

their product range. Some advisers were the market. While a large proportion of furloughed, and most were frustrated. people spend money on home and garden However, with a significant amount of renovations (61%) or holidays (23%), just work from the industry and The Equity 11% (home) and 3% (holidays) of the Release Council (ERC), by the amount released is used to meet start of April things were these costs. looking brighter. Instead, we see 29% More2life became of the proceeds being the first volume used to refinance lender to mortgages and oﬀer remote 18% being valuations, and used to repay the ERC’s unsecured standards borrowing. were Gifting is amended also popular, to allow for and 27% of legal advice people use that was not 22% of the provided faceequity released to-face. to help their Lenders also family and friends. stepped up, as did Rather than a advisers, who soon choice that is driven became comfortable with by a desire to update providing telephone or Source: Key Market Monitor the kitchen or go on a world video advice. cruise, equity release is being It was this collective eﬀort that meant driven by the need to refinance mortgages, that while Q2 (8,374) was poor, Q3 clear debts and support customers’ wider (10,671) and Q4 (9,930) were much families. better, with significantly more customers Some discretionary spending does take helped across this market. place, but it is certainly not the driving force behind these long-term decisions. MORE CUSTOMER INSIGHT This was particularly true in 2020, when What about those who are truly the advisers such as Key looked to focus on beating heart of the market – the supporting clients who had immediate customers? In Q4 2020, Key launched needs such as mortgage refinancing and a new digital advice delivery platform, debt repayment, often with the purpose which enabled it to look at not only how of boosting their available income to many people spent the proceeds of equity meet living costs, or to provide more release on a particular expense, but how financial flexibility during this period of much of the money they released was uncertainty, rather than those with more spent on each reason. discretionary spending desires. This has provided a rich steam of data, While the average customer age has which is slowly changing how people view fallen slightly to 71 years (FY 2019) from 6

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Feature

Product innovation also continued. 59% of plans allow ad hoc capital repayments – within each lender’s criteria – 50% included downsizing protection and 45% boast fixed early repayment charges. By the end of 2020, 453 products were available to meet customers’ needs. This was a boost from 292 at the end of 2019 and a nice recovery from the middle of the year, when some lenders trimmed their product ranges. 72 years (FY 2020), the Drawdown (53%) vast majority (76%) are continues to account still in the over-65 for over half of the bracket. market, but it is Given the interesting to demographic, note that not all it is perhaps customers use unsurprising drawdown to learn that as you might couples expect. (60%) make With up the largest drawdown section, sometimes followed by boasting single women better rates (26%) and then and features for single men (14%). specific customers, Single women we have noticed have typically always that some clients are ‘outnumbered’ single choosing to take the bulk of Source: Key Market Monitor the drawdown in one tranche – male clients – potentially as they have had smaller pension leaving a very small amount to savings and need to use their housing take out in the future if they need it. equity as a boost, or due to the fact that LESSONS LEARNT their partner has died and with them some While 2020 was a challenging year for of the couple’s joint retirement income. the sector, it has shown that underlying EXCELLENT YEAR FOR RATES customer need and desire for these 2020 was a good year for rates. The products makes the market more robust average product rate reached 2.8%, which than it has ever been. Supported by compares very favourably with fixed increasingly agile systems – as well as rates in the residential market, and was an industry that has seen the benefits of significantly lower than even Q1 working together for the greater good – 2019 (4.33%). 2021 is set to be a good year. 

“While 2020 was a challenging year for the sector, it has shown that underlying customer need and desire for these products makes the market more robust than it has ever been”

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Interview

LATER LIFE LENDING REMAINS KEY IN DIFFICULT TIMES Mortgage introducer speaks to Will Hale, chief executive at Key, to discuss how later life lending has fared during the pandemic How did Key fare in 2020, and what are the biggest lessons you have learned?

I think it is safe to say that 2020 wasn’t quite the year that we had planned, but I am proud of what we achieved as a company and as an industry. In 2020, the Key Market Monitor suggests that 40,470 plans were taken out – worth £3.4bn – which is a 13% fall in volume and 4% fall in value year-on-year. When you consider that our average customer is 71 and has likely been shielding – or at least cautious – for most of the year, this highlights just how robust the later life lending market has been. Despite all the challenges posed by COVID-19, Key has had a good year. We have not made any redundancies or needed to rely on government money to furlough colleagues – instead, we have focused on ensuring we are available to support customers at what has been a worrying time for many, as well as continuing to invest in systems and processes to take advantage of the inevitable growth we’ll see in the aftermath of the crisis. One of the biggest lessons we have learned is the importance of building flexibility into our model. Even the most 8

Will Hale

forward-thinking organisations are unlikely to have planned for a pandemic of the nature we have seen, so the need has been to be agile, have a deep and current understanding of the needs of customers and colleagues, and to act quickly and decisively to adapt. We amended our advice philosophy to ensure recommendations were appropriate to the prevailing environment and the impact on the wants and needs of diﬀerent customers. Holidays and home renovations

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Interview

were often not a realistic objective in the short-term, so unless people had a pressing need for cash we actively encouraged them to wait until the market started to open up more and they had a wider range of products to choose from. We also invested in more technology. Video appointments have been a real success, allowing us to continue to oﬀer face-to-face advice and involve family in the process – albeit in a virtual setting. While I am hopeful that we will return to more normal conditions in the near future, the lessons learned through the pandemic will ensure we emerge a more eﬃcient and more customer-centric business. How did the pandemic impact the type of customers taking out equity release?

Based on the nature of the demand that emerged in the early days of the pandemic, we were concerned that some customers might be having a knee-jerk reaction to the situation and be tempted to make decisions based on short-term drivers – something that would be inappropriate in the context of equity release. We focused heavily on ensuring advisers were taking a holistic view of a customer’s circumstances, considering both immediate needs and how choices made now could impact on financial flexibility and security further down the line. There has never been a more important time for advisers to advise, and not be order takers. Interestingly, as the pandemic evolved, we found that customers were increasingly ‘self-selecting’ – the amount spent on home and garden improvements fell from 17% to 11% of the funds released, while unsecured debt rose from 12% to 18%. The pandemic got people thinking about their financial security and that of their loved ones.

We saw the proportion of people gifting rise from 29% (Q1) to 32% (Q4). Some of this was naturally driven by the stamp duty holiday, and we saw over £200m released in H2 2020 for the purpose of deposits for a home purchase. Older homeowners have always demonstrated a genuine desire to help their wider family, but never more so than during the pandemic. This highlights the role that equity release can play in intergenerational wealth transfer, and the societal importance of the sector. Some lenders have temporarily withdrawn products from the market, whilst others have maintained high service levels. How do you think lenders performed overall in 2020?

I have been impressed by how lenders, advisers, surveyors and solicitors have collaborated to ensure that the market has remained open for business. However, some lenders have struggled, and those that have not invested in technology and instead remain handicapped by legacy systems have not displayed the agility that market conditions have demanded. When the dust settles, some lenders will need to reflect carefully on what is needed to ensure their proposition remains fit for purpose in a rapidly evolving market. One thing that has certainly come to the fore is the importance of online capability for key facts illustrations (KFIs), applications and case tracking. Getting hold of some lenders on the phone has been a challenge at times, but those that have invested in portal solutions have maintained high service standards. That said, although the technology capabilities of lenders have proved vital in ensuring eﬃcient working practices during the COVID-19 period, there is no replacement for eﬀective personal →

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Interview

communication. We carefully monitor the Air Temperature Check report – which measures, among other things, how eﬀectively lenders are communicating with advisers – and find a close correlation to the service levels we receive and lag times from application to completion. You launched a partnership with MAB in 2020. How is that going, and do you see this partnership being the first of many?

In the business textbooks, I suspect that launching a ground-breaking partnership in the middle of a global pandemic is not advised, but we did it and it is hugely exciting. Mortgage Advice Bureau (MAB) and Key Group have a similar heritage around challenging the status quo and creating innovative propositions for the benefit of advisers and their customers. We have great ambitions for this partnership and I am confident that we have built a solid foundation to support significant business volumes in 2021 and beyond. Looking to the future, I would say that later life lending is the sleeping giant of UK financial services. Only by getting more major distributors engaged will we be able to wake it. For most people housing equity is their biggest asset, and we need to educate not only customers but also advisers across the wealth and mortgage sectors on its the potential. As part of Key Group’s ambition to grow this market, we would naturally be keen to partner with other organisations which share our passion and commitment to help more customers achieve their wants and needs in later life. What do you believe is the true potential of the later life lending market?

I think perhaps we need to take a step back and define the market. Does it include 10

unsecured as well as secured lending? What about second charge mortgages and buy-to-let (BTL)? There are lots of questions to answer before we can truly define the market and its potential. Personally, I see the later life lending market as being focused on residential secured lending for customers who intend or need to maintain borrowing past retirement. It would cover products such as equity release, retirement interestonly mortgages (RIO) and mainstream mortgages available to older customers. Until we come up with a common definition, I think we will struggle to land a common view about the true size and potential of this market. That said, even if we just look at all mortgage lending to the over-55s, we estimate that this is worth around £50bn every year, or around £400bn of in-force business. By any definition this is not a niche market. However, as an industry we still operate in silos, which needs to change if all customers are to be given access to products and advice which are best suited for their individual circumstances. When equity release is mentioned, others are quick to mention RIO mortgages. How do the two compare?

While the Key brand is synonymous with equity release, our advice process ensures we cover all products and options which may be suitable for diﬀerent customers. That said, taking a side-by-side comparison of RIOs and equity release, when customers qualify for both products it is rare that modern equity release products available wouldn’t oﬀer the superior solution. In Q4, the average equity release interest rate was 2.8% fixed for the life of the loan. Customers can choose to serve

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Interview

interest or make regular ad hoc capital repayments in order to mitigate the impact of roll-up interest. Features such as inheritance and downsizing protection are also commonplace, and early redemption charges can either be fixed or linked to gilt rates. Add to this the embedded protections of guarantee of tenure and a no negative equity guarantee, and I feel that these are truly phenomenal products. RIOs are certainly a welcome addition to the landscape, and can offer a great solution for younger customers who cannot raise the loan-to-value (LTV) they require through equity release – such as for those coming off interest-only mortgages – or for customers where affordability is not an issue and the rates for the same LTV are better for RIO. However, there are significant downsides. There is no security of tenure, and with most RIO rates not fixed for life, this creates risk around the ability of customers to meet interest repayments for the duration of the loan. Both products have a role to play, and whilst modern equity release solutions are currently far superior to RIOs in my view, the important thing as products evolve and new options emerge is that advisers maintain a holistic approach and tailor recommendations to individual needs. It has been six months since the FCA highlighted that firms must do more to ensure they always give appropriate advice to equity release consumers. What progress has been made, and how seriously do you think the market took the review?

With increasing numbers of people considering how their housing wealth can support them in later life, we welcomed the Financial Conduct Authority (FCA) review as a prompt for the sector to reflect

on existing practices and ensure they remain appropriate for this rapidly evolving market. At Key, we’ve been carefully digesting all the points raised and ensuring that we meet or exceed the expectations of the regulator. We’ve also been encouraging collaboration across industry trade bodies to ensure a co-ordinated approach to implementing change as required. That said, while there are many in the sector taking proactive action on the back of the FCA review, I am concerned that some organisations are still too complacent. We must not assume that what has been acceptable in the past is going to be appropriate moving forward. We need to embrace the changing needs and wants of customers, and ensure advice is reflective of the prevailing product landscape. What are Key’s plans for the next 12 months, and how do you see the business navigating through an uncertain year?

2020 was a hard year for everyone, and the uncertainty has continued into 2021. However, I firmly believe that housing equity will have a vital role in helping society recover from the pandemic. The decisions we have taken through the crisis to support colleagues and customers, and the investment we have made to continue to develop systems and processes, should put us in a great position to benefit from market growth. With the MAB relationship now fully embedded, further advisers recruited into our whole of market oﬀering – The Equity Release Experts – and a sponsorship for ‘Afternoons on 4’ with Channel 4 helping us engage with more of our target audience, I am hugely optimistic that 2021 is set to be a fantastic year for Key. 

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Working with

Later Life

We’ve had a

BIG IDEA... Key Group’s market leading equity release proposition is now available as a specialist network proposition exclusively through MAB Later Life. Why join MAB Later Life? Gain access to: • Market leading customer facing technology • Exclusive later life products and lender panel • Strategic lead acquisition models • Compliance and competency training for advisers • Award winning learning and development programme • Recruitment support

A specialist proposition for specialist advisers. Want to know more? Contact Steve Humphries, our MAB Later Life Proposition Director

07971 956026 steve.humphries@mab.org.uk

Mortgage Advice Bureau

SPECIALIST ADVICE IN A SPECIALIST SECTOR Steve Humphries later life proposition director, Mortgage Advice Bureau

o paint a picture of current demand in the later life market, it is estimated that the total value of secured and unsecured debt for over-55s will rise from about £211bn in 2020 to £300bn in 2030. It is also estimated that the housing wealth of the over-55s is worth £2.5tn. To that eﬀect, those over the age of 55 today typically have large amounts of potentially untapped wealth that, if released, could transform their retirement. According to joint research by the Equity Release Council (ERC) and Mintel, the equity release (ER) market is set to be worth £5.65m by 2024. With this in mind, we know that outstanding advice leads to great customer outcomes, and really boosts the financial wellbeing of later life customers and their families. Some of the most popular reasons for over-55s releasing equity from their homes include carrying out improvements, gifting money to younger generations to help them get on the property ladder, or simply enjoying a better standard of living, which can often be achieved by clearing any debts. 14

Whatever the reason, choosing to release equity from your home is arguably one of the most important financial decisions a customer might ever make. This is why MAB chose to develop a unique and purpose-built proposition in the later life market. The relative importance of these choices and the need for good support was further underlined when the Financial Conduct Authority (FCA) chose to release its findings into the equity release sales and advice process in June 2020. While it found that some customers have seen good outcomes, it raised concerns about:  Insuﬃcient personalisation of advice  Insuﬃcient challenging of customer assumptions  Lack of evidence to support the suitability of advice Last September, we announced an exclusive strategic alliance with Key Group, the first of its type in the later life arena. Keenly aware of the issues raised by the FCA, we are confident that Key’s highly trained specialists and robust advice delivery process ensures consistent and unquestionable customer outcomes every time. Providing the right advice to customers through specialisation has been a cornerstone of MAB and for over 20 years, we’ve supported the growth and

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Mortgage Advice Bureau

development of some of the UK’s most solution. We believe that the proposition successful broker firms. is in a great position in relation to how the Under the MAB Later Life model, all FCA clearly wants the sector to develop. our appointed representative (AR) equity Ongoing business development support release advisers are full time specialists, is delivered by specialists at Key and guaranteeing a high level of knowledge MAB, all of whom become part of the and skill in the later life sector. AR firm or adviser’s team, including MAB will only offer an equity release dedicated telephone account managers licence to those advisers that specifically and marketing executives to drive advise in this area, rather than it being strategic customer acquisition. an add-on to their current mortgage and Our exclusive strategic partnership with protection licences. Key Group allows our advisers access to Specialist advice is a key differentiator some of the very best products and rates, for intermediaries, and later life represents not always available to the whole market. a clear opportunity for advisers to An example of this is the MAB Flexiservice new customers and extend their Choice product, which offers customers relationships with existing ones. competitive rates, a wide range of loanIf you are going to specialise in this to-values (LTVs), fixed early repayment sector, our proposition for intermediaries charges and a variety of drawdown as well delivers best in as lump sum plans. class training, Other product “Specialist advice is a key technology, and features include compliance, as well differentiator for intermediaries, early repayment as access to a lender and later life represents a clear charge exemptions, panel made up of the option to make opportunity to service new over 200 marketpartial repayments, leading products. and downsizing customers and extend their The digital relationships with existing ones” protection. advice delivery Advisers under platform is the MAB Later Life market leader, with customer innovation also gain access to the industry’s largest at its heart. The ease of use allows ER-dedicated compliance department. advisers to complete applications as part With much product development of the appointment, which contributes currently happening in the sector, to a more robust advice process, as the and technology being an enabler for adviser is automatically prompted to ask streamlining processes and efficiencies, relevant questions. it’s vitally important that advisers are Given the need to capture the supported to improve their knowledge customer’s phrasing of certain responses, and skills. this system supports this approach, Working closely with our ARs, we ensuring a highly comprehensive and know that with the team we have and this personal approach to fact-finding, alliance with Key Group, we can help capturing a full spectrum of personal and firms become market leaders by utilising financial circumstances and helping the the right systems, training, compliance adviser conclude whether ER is a suitable and development support.  Guide to Later Life – brought to you by Mortgage Introducer

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RIO MORTGAGES: A PRODUCT FIT FOR TOMORROW’S WORLD customers lead, ensuring we support a range of unique financial circumstances. Retirement interest only (RIO) Marie Catch mortgages were introduced to reflect this head of mortgage broker sales, shift. It became apparent that there was a Legal & General Home Finance lack of appropriate financial products to suit everyone’s needs. This was indicative ur understanding of what of the financial exclusion that can develop a retirement should be is when we try to take a ‘one size fits all’ changing. Customers are approach to one of the fastest growing living increasingly diverse groups of people. lifestyles into retirement, with some even → Housing wealth has also become a key continuing to work for many years past element of retirement planning for this the age of 65. generation, with recent research showing At the point at that housing wealth which people reach is at its highest their retirement, the “As an industry, it is important ever (£7.39tn) and for us to continue to innovate diversity of their that over-50s hold lifestyles and savings and oﬀer products that suit the three-quarters of can, understandably, this, making it an flexible lives that customers present a range of essential factor to varied financial consider in planning lead, ensuring we support challenges. for later life. a range of unique financial For instance, We have seen circumstances” despite a growth customers going in the average to advisers with an disposable income of retired households expanding range of needs, whether to in recent years, inequality between purchase a property that will suit them households has been increasing. in their later years, to release cash to As an industry, it is therefore important top up their income or, as we have seen for us to continue to innovate and oﬀer increasingly during the pandemic, to products that suit the flexible lives that bolster the finances of family members.

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The growing requirements faced by allows those who are juggling multiple this group are likely to have contributed needs to better plan their finances in the to the increase in providers offering RIO long-term. mortgages, as they seek to provide a It also means older borrowers should be flexible solution for their customers. more likely to have something to pass on The positive shift in the number of both as an inheritance, or to pay for long-term lenders and deals out there is particularly care, further down the road. good news for borrowers approaching The pandemic has also opened retirement who are on an interest-only many people’s eyes to the value of the mortgage product already. community in which they live. Historically, there has been a limited One thing that has stood out to me over range of options available to this group the last year is how much the country of older borrowers when they reach the has been brought together. We have seen end of their existing interest-only deal, so communities working closely to deliver improving flexibility and choice is likely supplies, help vulnerable neighbours and to be well received. clap for carers on their doorsteps. The product may also have increasing Many older borrowers who may relevance in the wake of the COVID-19 previously have been looking to their pandemic. As a retirement interest property wealth to fund retirement only mortgage through downsizing only requires a now be “The positive shift in the number may customer to pay off reluctant to move of both lenders and deals out the interest each home and leave month, they will there is good news for borrowers their support have lower monthly network behind. approaching retirement who are A retirement repayments, which means less strain on on an interest-only mortgage interest only monthly income. mortgage can product already” This is give people more particularly relevant choice, offering now, as the economic circumstances them the option to remain in their home surrounding the pandemic have seen for their later years and release money a significant impact on the incomes of through a mortgage, rather than having to people of retirement age. downsize to a smaller property in order to Research we undertook last year found supplement their retirement income. nearly one in four retired people (23%) As an industry, we have a responsibility have seen their finances impacted in some to ensure that we are constantly evolving way due to COVID-19. This will result in and adapting to our customers’ needs as many people having to adjust their plans and when they begin to change. and look for new ways to support not The evolution of retirement interest only their own finances, but those of their only products is a great example of how loved ones, who may also be facing some we are doing this, providing customers form of uncertainty. with another option to tackle financial The ability to pay the interest due on challenges and to live better, more the balance of their mortgage each month fulfilled retirements as a result.  18

Guide to Later Life – brought to you by Mortgage Introducer

For adviser use only

Which one of our Later Life Mortgages could be right for your client? Flexible Lifetime Mortgage

Optional Payment Lifetime Mortgage

Income Lifetime Mortgage

Retirement Interest Only Mortgage

Additional amounts may be taken subject to age and property value

Additional amounts may be taken after six months subject to affordability and credit checks

Pay some or all of the monthly interest

Must pay all of the monthly interest

Amount available determined by age

Can only be made once your client stopped making the monthly interest payments

Can only be made once your client has stopped taking the monthly income

Additional ER1 qualification needed to advise

A tax-free lump sum Fixed interest rates Affordability checks The ability to take additional amounts Pay off the monthly interest Loan to value available

Overpayments or optional partial repayments available1

Amount available determined on affordability up to 60%

Stay in and continue to own their home No Negative Equity Guarantee Qualifications required to advise

Additional ER1 qualification needed to advise

Standard mortgage qualification needed to advise

Transfer mortgage when they move home2 May affect means-tested benefits Stop making monthly interest payments at any time 1

Subject to terms and conditions.

Subject to the new property meeting our criteria.

A lifetime mortgage is a loan secured against your client’s home

To find out more, speak to your dedicated account manager, or contact us below: Call

03330 048444 Email

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Later life specialists At Hodge we’ve specialised in providing a range of mortgages with a focus on the over 50’s for over 55 years. To find out how our unique proposition can offer your customers greater choice and flexibility, contact our expert broker support team today.

0800 138 9109 hodgebank.co.uk/intermediaries

Our promise to our customers means that, if they’re paying off the mortgage in full and moving out of the home, we’ll waive the Early Repayment Charges – giving them one less thing to worry about.

Hodge is a trading name of Julian Hodge Bank Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 204439. Hodge Life Assurance Company Limited is authorised and regulated by the Financial Conduct Authority under registration number 139315. Registered office for both in England & Wales is One Central Square, Cardiff, CF10 1FS (No.743437)

102752 The Mortgage Press Ad A5 v6.indd 1

11/03/2021 10:03

Hodge

RIOS – A GOOD THING? Wes Regis national account manager, Hodge

on many ER plans, or even overpay, mitigating the debt compound eﬀect. We have seen rates, fixed for life, at an all-time low, and in many cases cheaper than what might be oﬀered on an equivalent RIO mortgage. Today, many older clients will have their needs met by an ER solution.

etirement interest only (RIO) mortgages are a little over two years old now. In financial MARKET INNOVATION product terms, they are still a We have also seen innovation in the toddler, and just like a toddler they are ‘mainstream’ residential later life still finding their feet within the larger mortgage market. Later life residential landscape of the mortgage market. mortgages with a defined fixed term – It is fair to say that it has not been remember that RIOs are a lifetime term plain sailing by default – such for RIOs since as our very own “It can be argued that since their inception. interest-only Hodge → its inception the gap that the Challenges around 50+ mortgage, for market awareness example, are RIO is targeted at – and where and understanding, very popular. it is relevant – has narrowed. combined with The affordability those linked to stresses applied to But there is still a gap” how affordability these solutions are not necessarily the and redemption same as those we see with RIOs. is assessed and stressed, as well as the In many cases, where an RIO nervousness of compliance departments to affordability assessment fails, a defined venture into the RIO space, has resulted term 50+ style mortgage can be counterin a much slower uptake of this later life solution than many initially imagined offered instead. Today, many older clients back in the summer of 2018. have their needs met by these defined This is by no means a definitive term residential solutions. list of factors that have impacted the It can be argued that since its inception distribution of RIO mortgages. the gap that the RIO is targeted at – and Another major factor is innovation and where it is relevant – has narrowed. But there is still a gap. In certain change in the equity release (ER) market circumstances, an RIO is still the right over the last two years. We have seen increased flexibility to service the interest answer. Dependent on the borrower’s Guide to Later Life – brought to you by Mortgage Introducer

10:03

Hodge

individual requirements, an RIO mortgage may be their only viable option, and the only solution to meet their needs. We see cases like this every week at Hodge, and we see Hodge RIOs providing great customer outcomes when no other product type could.

and life event redemption strategies would help position RIO better. We also need advice firms and their compliance functions to embrace RIOs for what they are, look to understand where they fit, and offer a more holistic service. I am confident that by all working together on these points we can provide MARKET INNOVATION even more great customer outcomes in the From my point of view, when I saw a later life arena. recent headline that states ‘only 2,911 One final thought – RIOs are currently RIOs sold since 2018’, I was pleased, as the specialised spanner in your toolkit that means that 2,911 customers have that you use when it is needed. You don’t been helped by this product who may not need it every day, but when you, you’re have been otherwise. glad you’ve got it. It performs its task, Since these headlines, Hodge has seen gets the job done, then gets put back in a marked increase in the number of RIO the tool kit until you need it again. clients throughout the course of 2020. If you ever lost it, you’d be cursing the Many of these clients are looking to RIOs next time you actually needed it! to support purchase Hodge offers transactions, with a range of later “We need advice firms and the stamp duty life interestholiday backdrop. only mortgages, their compliance functions to I believe that the fixed embrace RIOs for what they are. including having RIO term 50+ and mortgages available I am confident by all working the lifetime term as an option – to fit RIO. These are together on these points we the right customer available to clients can provide even more great in the right from the age of 50, circumstances – is and can be used customer outcomes” a good thing, and for a variety of is beneficial to the purposes, including consumer. remortgages, capital raising and purchase. Far better to have a range of different Hodge manually underwrites every products for later life borrowing, rather case, accepting a broad range of incomes than not having them available as an both pre and post retirement. option at all. Changes in UK demographics, cash RIOs are not the silver bullet to solve requirements in later life, and pressures everyone’s needs, much like any financial ranging from funding long-term care to solution, and they definitely still require supporting adult children, have resulted in work to increase their relevance and a rapidly growing later life market. viability in this ER and mainstream If you would like to learn more about mortgage dominated later life market. the opportunities to financial advisers, Focus and attention by the regulator please reach out to your local Hodge and lenders around affordability stresses business development manager.  22

Guide to Later Life – brought to you by Mortgage Introducer

Product Specification Overview Our range of inerest-only mortgages and lifetime solutions are designed to give older borrowers greater choice and flexibility, no matter what their circumstances. Our dedicated teams of Business Development Managers and underwriters will work with you to find the right solution for your customer. Age

50+ Residential Mortgage

Retirement Interest Only Mortgage (RIO)

Loans available

£20,000 - £1 million

Loan to value (LTV)

Max 75%

Property value

£120,000 - £2 million

Rate options

Fixed or variable

Fixed for life option?

Fee free options? Min age at application

Max age at application

Max age at end of term

None

Repayment vehicle

Required for end of term

Repaid upon death or entering into long-term care

Affordability assesed Monthly interest payments required? Overpayments (10% pa) Employed/selfemployed income up to age 80 considered Downsizing Protection/ Hodge Early Repayment Promise from Day 1

0800 138 9109

support@hodge.co.uk

hodgebank.co.uk/intermediaries

Hodge is a trading name of Julian Hodge Bank Limited which is registered in England and Wales (No. 743437). It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Its registered office is One Central Square, Cardiff, CF10 1FS.

Guide to Later Life – brought to you by Mortgage Introducer

more2life

SHAKEN, BUT NOT DETERRED Stuart Wilson corporate marketing director, more2life

n the 12 months that followed the first case of coronavirus being confirmed in the UK at the end of January 2020, the later life lending market underwent a rapid evolution from its previous trajectory of growth and development. It’s a period that saw lending volumes ebb and flow in equal measure, as consumers – as well as the critical mechanisms and infrastructure of the market itself – grappled with the challenges of life in a strange new socially distant world. It is impossible to look back on this time without a solemn reflection on the toll of human lives lost. It is also clear that even for those not physically touched by the virus itself, the economic impact of both the pandemic and the control measures deployed to counteract it have left many lives shaken and even shattered. For the working population, it was the younger generation at the beginning of their working lives and older workers on the path towards retirement that arguably suﬀered the most. For example, unemployment rates among 16 to 24-year-olds rose by 14% between January and September 2020. Although things will no doubt recover, the harsh reality is that the current crisis

has pushed many young people’s financial goals even further out of reach. Older workers have also found that the crisis has negatively impacted them, with some being forced into an unplanned and perhaps underfunded early retirement. According to research by the Institute for Fiscal Studies, nearly one in four employees aged 54 and over who were working before the crisis were on furlough in June to July, while among those still working, one in five were on fewer hours. The same study showed that 6% of people aged 66 to 70, and 11% aged 71 or over who were working immediately before the pandemic had now retired. PENSIONER BOON

For older people already in retirement, the economic picture has been somewhat rosier. Those aged between 65 and 74 were able to save an extra £332 per month compared to those below the age of 30 during lockdown, according to figures from the Oﬃce for National Statistics (ONS). Older homeowners have also benefited from a record year of house price growth. According to the latest Pensioner Property Index data from Key, over-65s saw their property wealth increase by more than £9,200 on average in the past year. This divergence of financial fortunes across the working-retired divide has shifted consumer behaviour when it comes to later life lending. Discretionary spending – money being released for holidays, new cars and so on – took a →

Guide to Later Life – brought to you by Mortgage Introducer

more2life

sharp fall in 2020 as the pandemic took release today, it has never been cheaper to hold, whereas spending on necessities borrow money in later life. such as the paying down of mortgages and Product innovation is helping here, too. unsecured debt increased, helping people While the initial impact of COVID-19 to reduce or remove unnecessary monthly saw about 25% of product options outgoings as belts around the country disappear from the market, these have were tightened. largely returned, and indeed the number Gifting, too, remained a strong has increased to now just under 500 motivator behind equity release. Indeed, products and options across the spectrum looking at this in terms of the value of of the loan-to-value (LTV) range. money released, gifting was the second Increasingly, these products include highest trigger overall, after mortgage modern lending features such as fixed repayment. Again using Key’s data, a early repayment charges and flexible staggering £756m was gifted in 2020 capital or even interest repayment options through equity that are helping release – roughly £1 clients to manage in every £5 released “As housing wealth further their later life debt – with the average more eﬀectively. embeds itself into the gift totalling around This also mainstream DNA of later life £56,000. £192m of underlines the that gifting total was financial planning, experienced vital importance of for early inheritance advisers will be at the forefront seeking specialist purposes. as this market of delivering integrated, holistic advice Consumer continues to evolve, advice to an increasingly demand, then, has and consumer remained strong and savvy consumer” choice increases helped the market exponentially. to return quickly to As housing wealth pre-COVID levels of borrowing by the further embeds itself into the mainstream end of Q4. The focus on needs-based DNA of later life financial planning, spending, such as debt repayment, as experienced advisers will be at the well as helping younger family members forefront of delivering integrated, holistic through intergenerational lending and advice to an increasingly savvy consumer. gifting, reflects perhaps the sombre but As we head through – and hopefully out nonetheless determined mood of the UK’s of – the latest lockdown period and back older generations to use housing wealth as towards some semblance of normality, the a buﬀer against an extraordinary event. equity release market looks robust and in During this period, average interest good health. rates have continued to fall to a new It is shaken, but certainly not deterred, market low. as more lending options, consumer Although wider economic conditions choice and flexibility is delivered via have seen some rates creep a little higher specialist advisers to a growing number so far this year, in the 30 years since Safe of consumers who are keen to explore the Home Income Plans (SHIP) defined retirement options that housing wealth the very market we recognise as equity can help unlock.  26

Guide to Later Life – brought to you by Mortgage Introducer

CM1

Plan specifications Innovative plans for your clients

We arm you and your clients with the broadest range of lifetime mortgages and features on the market for added flexibility and protection now and in the future. Our plans come with features such as fixed ERCs, partial repayments, inheritance protection, downsizing protection, and ERC exemptions at no extra cost where your client is eligible. Plans

Flexi Choice

Capital Choice

LTVs

5–51.5%

7.5–55%

Extras

Fee free options

Partial repayments

Fixed ERCs

ERC exemption on death/ admission into long-term care of first borrower Downsizing protection Inheritance protection

Up to 10% of total cash advance in each 12 month period from loan completion date, from day 1

Cashback available, fee free & valuation fee free

Tailored

Maximum Choice

Prime

21.5–54.5%

25–55%

25.5–56.4%

Fee free & valuation fee free

(enhanced LTVs available)

Cashback available, valuation fee free

Up to 10% of initial loan amount in each 12 month period from loan completion date, from day 1

Up to 12% of total cash advance in each 12 month period from loan completion date, from day 1

Up to 10% of initial loan amount in each 12 month period from loan completion date, from day 1

Yes

Yes, lump sum plans only

Yes

For current rates, please log in or register on fastpath,

more2life.co.uk/our-lifetime-mortgages

This is intended for intermediaries only and has not been approved for customer use.

more2life Ltd is authorised and regulated by the Financial Conduct Authority. Registered in England No 5390268. Registered office: Baines House, 4 Midgery Court, Fulwood, Preston, Lancashire PR2 9ZH. CM154.1 (03/21). © more2life Ltd 2021

CM154.1 M2L Plan Spec A5 Ad.indd 1

05/03/2021 14:41

Air Group Your trusted later life lending platform 2021 is going to be the year of later life lending. Now is the time to get up to speed with the best ways to maximise the potential with your later life lending clients. Air Group has everything you need to thrive in this growing market. Here are the 4 core areas of our proposition which will support your later life lending journey. Trusted, accurate, timely product sourcing technology Air Sourcing is the most comprehensive sourcing platform. You can have conﬁdence in the speed and accuracy of the results. We’re plugged into a growing number of lenders and are constantly improving those connections.

Growing your business and income With access to exclusive products and rates, we can help you expand your offering to your clients. Our membership tiers mean there is an option to suit all business needs, the more business you write through Air Mortgage Club, the more you’ll get back.

Developing your advice skills Develop your skills through our 7 modules training programme which is accredited by the London Institute of Banking and Finance and achieve Professional status. Academy members also beneﬁt from enhanced commissions and exclusive products.

Fighting your corner We take the time to understand the issues which are important to the independent adviser ﬁrms. We constantly negotiate with lenders to get you the best deals possible. We have a dedicated support team contactable via email, live chat and telephone.

To start your later life lending journey today, call

01452 310777

or email support@answersinretirement.co.uk