The year ahead for later life lending
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As I write this, we are a week back in work after the festive break, I hope you were able to enjoy some fun and relaxation with friends, family and colleagues.
Thoughts however inevitably turn to what 2024 might bring and, after what was a challenging 2023, there are a number of positives we can hold onto and, with a strong degree of focus and commitment, can turn opportunities into real business transactions.
However, what might be the major themes we’ll see in 2024 and how might they impact on the later life sector and, of course, the lives of working advisers? Here are a few which I think will be key:
Rates
It’s an obvious point but higher rates do tend to stifle activity. Within the lifetime mortgage space, rates are not the be all and end all, nor should they be, but affordability clearly plays an important role, and will certainly do so in terms of a consideration of all later life lending products for clients.
That said, rates determine activity in terms of residential mortgages for later life borrowers, and of course there are a growing number of options for lifetime mortgage customers to pay ongoing interest. Indeed, as we know it is often desirable for them to do this, either in full or partially, in order to counter the cost of compound interest on products.
So, of course, rates are important. It’s fair to say that our entire sector was spoilt in years gone by with incredible, historically low, rates to offer customers. Clearly, in 2023 that went the other way and we were faced instead with an environment in which rates were the highest they have been for a decade-plus.
However, towards the end of the year, as we saw a greater degree of stability and certainty – particularly in terms of inflation coming down – the trend for rates was downwards, and it was a real positive to see rates coming down a little.
While nothing is guaranteed – in 2024 we would hope to see further stabilisation of rates at these lower levels, and I anticipate growing activity levels for advisers as confidence returns to consumers and advisers.
Product choice
2023 certainly saw some movement in the right direction in terms of product choice, not least in the form of newer ‘hybrid products’ which combine a number of elements, namely, products for customers below 55, those that move from a more traditional residential mortgage into a lifetime mortgage later in life, those that offer higher LTV access as a result, etc.
Essentially, we have seen a blurring of the product demarcation between traditional residential products, RIOs and lifetime mortgages, and this is a real positive for the client in terms of what they can access now but also what they can access in the future.
The important point here however is that as these edges have blurred, so essentially must those amongst the advice profession. I’ve said many times throughout recent years that I believe we are seeing the last days of the specialist equity release adviser, not because these individuals aren’t excellent at what they do, but because there are so many options available to customers beyond just lifetime mortgages.
It’s absolutely vital therefore – and this all ties into Consumer Duty – that advisers are able to successfully provide advice across all these potential product avenues, not just one narrow silo.
If it wasn’t already the case, 2024 is going to be the year of the later life lending adviser as we move away from single product areas to be able to advise and recommend a far greater array of products and services.
Service levels
When market activity is not running at its very hottest, the focus on providing a fantastic service can be all-consuming. Certainly, that’s what we’ve seen from many lenders and providers in the later life market where service levels have tended to be very high.
If, as I anticipate, we start to see a greater increase in activity – and towards the end of this year we did start to see this – then it’s my hope that we also continue to see the very highest service levels.
We all know that last time it got incredibly busy in our sector, service levels struggled, and while I’m not anticipating we’ll get back to those level of transactions over the course of the next 12 months, it would be nice to think that an excellent service standard can be maintained by all.
General Election
Regardless of whether you think the impact on the later life lending market is going to be significant or not, there’s no doubting that many minds will be on the next General Election. Earlier this month, Rishi Sunak suggested we’ll be waiting until at least the second half of the year for this, however – depending on what might happen over that time period – he may feel it’s worthwhile holding onto the bitter end.
However, an Autumn Election seems most likely, but as we know, politics – certainly in this country lately – changes, and changes quickly. What price another new PM before the next GE? It seems more likely than it did a year ago.
However, what we do know is that a General Election is coming, and – if as the polls are currently suggesting – we’re going to have a new party in charge, then clearly there will be significant change to come. Who knows what that might be though but, as we know, it’s best to be prepared for every eventuality.[LE1] [RG2]
Overall, I’m looking forward to 2024 because I believe there are strong fundamentals that will continue to drive demand, and that right across the later life lending piece, there are opportunities to be grasped. We’ll be here every step of the way to help advisers grasp them.
Stuart Wilson is Chairman of Air Club
First published in Mortgage Solutions 16th January 2024