Growing older is part of life.  And often, with age, financial security becomes more important than ever.

For many of us, owning a home is a huge part of that security. And for most people, that means getting a mortgage.

However, as retirement approaches, homeowners in the UK may find themselves in a tricky situation if they want access to a mortgage. Often the options on offer to them are limited.

You may have experienced customers who aren’t able to shop around or get a mortgage at all, simply due to their age.  Retirement should be a time to relax and enjoy life away from the pressures of the daily grind. And yet, many may find people themselves worrying about their home.

So why can having a mortgage in later life be important?

There are many reasons why people want a mortgage into retirement. It could be to support their lifestyle or to pay for home improvements. Or for some, it’s simply to allow them to stay in the home they love.

Here are a few examples to bring this to life.

Example 2

John and Beth want to pay down their debt as soon as possible.

John, 54, and Beth, 52 are on an interest only mortgage, with no repayment plan. Their joint income is £80k.

They don’t want to downsize as they love their property and location. They are looking at a capital & interest repayment product. They would like to keep their monthly payments low.

Example 3

Melanie has recently separated from her partner and needs a mortgage that helps her meet affordability requirements.

Melanie is 56. She is a nurse with an income of £45k.

Her priority is to remove her partner from the mortgage and avoid having to sell the family home and downsize.

As the mortgage will rely on her income alone, affordability as well as end of term age limits are stumbling blocks for her.

How can Perenna help?

Here at Perenna, we want to help homeowners make the most of their retirement. And for us, age is just a number. That’s why we’ve removed age limits. Instead, we assess mortgage applications on property value and whether the monthly payments are affordable (maximum loan to value limits may apply). This could make a huge difference for each of the examples above. It could be the difference between your customer achieving their goals and not.

Want to find out if Perenna could help your customers? Why not use our calculator to find out how much they could borrow? Or get in touch with the team to find out more.

Correct at time of publishing.

Growing older… the one thing we cannot stop

People are living longer, working longer and retiring later. This is a trend that has been gathering pace over recent years, but (dare I say it), the mortgage market has not kept up!

If you think about a typical 1930’s house, it is very compartmentalised. There is a separate kitchen, dining room and living space. Fit for purpose perhaps, but nevertheless has fallen out of favour.  In recent times, we have seen a switch to more open plan arrangements where you can be together whilst cooking, eating and doing homework. In short, the structure of our houses has moved with our lifestyles.

Could the same be said about our later life mortgage market? It works, but perhaps it’s time for an upgrade? Maybe now is the time to bring the market in line with how we want to live?

There was lots of talk in the industry from 2010 onwards about later life lending which in turn lead to RIOs (retirement interest only mortgages). The idea was that RIOs would assist and give greater choice to the consumer – and to a degree this worked… A move from costly equity release (which was perhaps the only option via a Lifetime mortgage) to interest only, which instead protected equity and inheritance for families.

But does this do enough? Is more innovation needed?

Some could argue that not all people want interest only and this in itself is a more expensive option compared to a repayment mortgage where the capital (not just interest) is being reduced.

Repayment (which may be preferred if available) is usually the better option, however, it comes with lender concerns over long term affordability. Especially with lenders stress testing, looking at maximum age & proof of income in a market where relatively short- term fixed rate products are the only option on offer.

A further change is needed. If we think about that 1930s house, it feels like there’s more work to be done, before it’s quite right for 2023 living.

So what’s the answer?

Perhaps a long-term fixed rate repayment mortgage, without reversion, would do the job.

A longer-term product where the monthly payment does not change for the life of the loan, providing stability and certainty.

And that’s where Perenna comes in. Perenna mortgages are financed through long term covered bonds rather than retail deposits. This allows Perenna to offer a longer-term option to borrowers. It means there’s now an option where homeowners needn’t worry about rates changing or being denied access to products as they approach retirement. The short ERC of 5 years provides flexibility too.

Why shouldn’t it be feasible to use a pension for monthly mortgage payments? This should be an individual choice. Surely a happy retirement means financial freedom and choice? Longer term options should not be out of reach where suitable for the individual. And with no age limits, Perenna’s approach supports this. It’s that extra step towards the open plan arrangements of the modern-day house!

This style of lending on a longer term fixed could certainly be used as an option to exit RIO/TIO. And thinking about cost, a longer term alternative should be more cost efficient than the current options of rolled up interest, or monthly interest only.

There is definitely a gap in the market and  it feels like there’s a need for more activity and competition in this space. After all, variety is the spice of life!

So, with consumer duty seeking better outcomes for borrowers, an alternative option in the later life lending space could certainly be something for consideration.  We’re keen to have that discussion with you, so why not get in touch. 

Correct at time of publishing.