Mortgage advisers are not doing enough to support over-50s with later life lending options, according to Key Later Life Finance.
The firm warns that many advisers are failing to make customers aware of all their choices, potentially leading to poorer financial outcomes.
Key argues that this missed opportunity is not only a business growth issue for mortgage advisers, but also a concern under Consumer Duty rules, which require firms to ensure clients consider all their available options.
GROWING DEMAND FOR LATER LIFE LENDING SOLUTIONS
With more people carrying mortgages into later life, demand for specialist lending solutions is increasing. Bank of England figures show that more than two in five mortgages now extend beyond retirement age, yet many advisers still overlook later life lending products, Key says.
Borrowers, in turn, may assume they won’t qualify for new loans due to their retirement income and, as a result, avoid seeking advice. Key argues this lack of engagement means many homeowners fall onto expensive standard variable rates or accept a product transfer from their current lender, even if better alternatives exist.
ADVISERS NEED TO ADAPT TO A CHANGING MARKET
Key is calling for mainstream mortgage advisers to become more proactive in educating older customers and researching all available lending options. This aligns with Consumer Duty requirements and the Financial Conduct Authority’s (FCA) recent guidance, which urges firms to ensure customers properly assess their choices.
The potential market is significant. Analysis shows that over-50s own approximately £4.7 trillion in property wealth, accounting for 78% of total UK housing wealth. Within this, those aged 50 to 64 hold around £2.18 trillion. At the same time, government data reveals that average retirement incomes currently stand at £20,120 per year, rising to £29,170 for couples.
While many in this group face challenges around managing debt in retirement and potential income shortfalls, their property equity represents a valuable financial asset. Key argues that mortgage advisers have long supported these customers in getting onto the housing ladder—but must now adapt their advice strategies to maintain good outcomes in later life.
THE LATER LIFE LENDING LANDSCAPE
Key explains that the later life mortgage market is increasingly complex, with solutions including:
- Retirement Interest-Only (RIO) mortgages
- Term Interest-Only (TIO) mortgages
- Long-term fixed rate mortgages for older borrowers
- Lifetime mortgages, with options to fully or partially repay interest
- Products with limited or no early repayment charges
Despite these options, Key argues that many advisers fail to fully consider affordability factors, such as what level of repayments a customer could manage on a regular or ad-hoc basis. Additionally, key customer details like health and lifestyle information are often overlooked, even though product innovations in the sector make this data crucial for securing the best outcome.
Key also warns that some so-called “specialist” advisers are not keeping pace with the sector’s developments and remain too focused on limited solutions, rather than assessing mainstream mortgage options where appropriate.
IMPROVING ACCESS TO THE BEST OUTCOMES
Key is urging advisers to review their approach and ensure they consider all possible lending solutions. This includes establishing trusted referral partnerships so clients can access products the adviser does not directly offer.
Will Hale, CEO of Key Later Life Finance, said: “All advisers have an obligation to consider all later life lending options for over-50s customers under Consumer Duty, but too few are doing that and therefore failing their customers.
“Too many focus on their own area of expertise and do not think more widely.
“There is a huge opportunity for mortgage advisers to grow their businesses and improve their customers’ lives by focusing more on this sector and ensuring they stay abreast of all the product innovation taking place.”
And he added: “Technology can help, with tools such as Air’s Navigator or LiveMore’s Mortgage Matcher offering efficient ways to compare products and support advisers in evidencing the consideration of all options.
“Having trusted referral arrangements in place is then critical to ensuring that a customer can access all products that may deliver the best outcome for them with as little friction as possible.”
