Financial advisers should better cater to older borrowers

By Helen Fisher on August 23, 2018

Pension funds and property wealth should be examined as a whole when planning future finances.

A new report published by the trade association for mortgage lenders calls for a more coordinated manner of providing financial advice to the country’s increasing population of older borrowers and homeowners.

Presently, financial advisers are often experienced in either pensions, mortgages or investments, but only the best of them are able to offer a holistic overview of all the available options.

According to the Intermediary Mortgage Lenders Association (IMLA), the increasing number of individuals over 65 whose assets are tied up in residential real estate means that their pension funds and their property wealth should be examined as a whole when planning for their future financial needs.

In the report, the IMLA also raises concerns over the rapid rate at which new products are emerging that are aimed at the increasing number of individuals who are borrowing into their retirement funds. This, the IMLA says, might put further strain on the present financial advice system.

The IMLA adds that there has been a 52 per cent increase in the number of homeowners in the 65 plus age group during the last two decades. This, it says, is about six times the British average. Even more significant, it is nearly double the growth rate of this age group.

The report goes on to reveal that nearly 69 per cent of the country’s housing equity is currently being held by people over the age of 55. It projects that retired people’s mortgage debt will increase by 100 per cent between now and 2030.

The report also mentions that there were currently well over 40,000 interest-only mortgages held by people over 65 that will mature before 2032. A large number of these borrowers will have to be granted extended mortgage terms if they want to continue living in their homes after their home loans mature.

The report continued by saying that with lifetime mortgage lending surging by around 29 per cent per year over the last four years, and financial products innovating at a rapid rate to keep up with all these changes, financial advice has to evolve to address these needs.

The IMLA’s Executive Director Kate Davies said that socio-economic pressure and changing demographics mean that there is a high probability that later life lending will turn into a notable growth sector for the mortgage industry.

Davies added: “And, as more retirees seek to stay in their homes or unlock equity, product innovation will drive lending forward and make it a bigger component of financial planning in retirement.”

She went on to say that the report also shows that many retired individuals’ homes are worth the same or even a lot more than their pension funds – and both these elements must be considered when planning a comprehensive retirement plan.

This, Davies concluded, created challenges for financial advisers, many of whom have expertise in a specific area such as investments, pensions or mortgages, but not necessarily the permissions or qualifications to deliver cross-spectrum advice.

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