In many ways, last year was a consolidatory yet overall successful year for the later life sector.
Increased volume was achieved by continued product innovation and a fundamental belief by stakeholders that this sector is here to stay and will add value to millions of homeowners when appropriately explained and sold.
Funding continued to be a challenge for some, but as the year progressed, more deals got over the line. The Asset Backed Security conference in Barcelona in June had representation from nearly all UK Later Life Lenders and there were plenty of funders in attendance looking to transact. We will undoubtedly see more liquidity in the market as a result, which will clearly drive volume moving forward.
FROM A SUPPLIER PERSPECTIVE, WHAT DID WE OBSERVE?
As a provider of digital servicing technology we saw continued total overall growth in book size across our client base. We also saw first-hand a lot of product innovation and most interestingly, we saw increased utilisation of our migration API to move many portfolios from non-Phoebus lenders to those using our servicing solution. Account migrations onto Phoebus ranged from a few thousand to hundreds of thousands of accounts.
Some of the reasons for these transactions include, clients looking to lower cost, create operational efficiency and increased operational resilience requirements with the transition period for regulatory change looming in this area.
SO, WHAT TO EXPECT THIS YEAR?
As mentioned, operational resilience will be a focus for Q1, not just for later life but the whole mortgage industry. It remains a great time to look at suppliers and ensure they meet all requirements within the documented requirements from the FCA. As a general rule when choosing a core platform supplier, ideally ISO 27001 alongside Soc 2 is a great indicator that the supplier is fully fit for purpose in this area.
The other regulatory spotlight continues to fall on outcome-based regulation. This should be a great enhancement to advisers’ lives, as providing advice based on achieving specific outcomes rather than focussing on a process, should only be good for the borrower. There are undoubted compliance concerns around this large change from “rules-based sales”.
Liquidity will continue to increase in the sector as existing funding lines are increased and new funders come to market. The Asset Backed Securities conference is a must-go event for the relevant stakeholders if considering funding options this year.
Product innovation will continue as lending to over-55s is delivered in many ways. Products including the collection of repayments are now the norm. Why wouldn’t we also see more specialist style lending such as buy-to-let products be launched in some form supporting the age demographic? Expect exciting developments as the year progresses.
From a tech perspective, we continue to focus on driving efficiencies and lowering the cost of servicing an account for clients. AI will undoubtedly play a part across the lending process and this continues to be a focus for tech firms like ourselves. But it’s about ensuring we get it right and use AI to deliver value above and beyond process automation that has been a cornerstone of our business for many years.
In summary, 2025 promises to be another pivotal year for the later life lending sector, building on the successes and lessons of the past year. With increased liquidity, ongoing product innovation, and a regulatory focus on operational resilience and outcome-based advice, the industry is well-positioned to deliver even greater value to borrowers in later life.
As technology continues to evolve, particularly with the development of AI, the potential to enhance efficiency and reduce costs for lenders will further solidify the sector’s position as a vital component of the broader mortgage market. By embracing these changes and maintaining a commitment to transparency, adaptability, and customer-centric solutions, the later life lending industry is set to achieve meaningful growth and help millions of homeowners unlock new possibilities in the years ahead.
