According to Legal & General Mortgage Services, which is involved in around a third of all mortgage transactions in the UK, there has been a dramatic increase in the number of over-50-year-olds applying for mortgages.
Rising house prices, coupled with increasing longevity, have pushed the average age of the first time buyer to 33, with a growing number of buyers having to wait until their late 50s to get on the housing ladder.
However, for those in the later stages of life, taking out a mortgage can come with unnecessary hurdles.
Lenders are generally more hesitant to lend to those borrowers who are either nearing or in retirement, as while there’s no universal “stop age” for mortgages, most lenders set age limits for both the start of a mortgage term and its end.
Typically, the maximum age for taking out a new mortgage is around 70-80, while the maximum age for the mortgage term to end is around 80-85.
On a standard 25-year mortgage, that suggests the minimum age is around 60 for those taking out a new loan, but there’s also a growing market for mortgages lasting 30 years or more, with some even reaching 40 years to manage monthly payments.
Lenders typically rely on payslips to assess the affordability of mortgage loans, which often excludes older borrowers, who tend to have limited remaining earning power.
That’s even though income in retirement, usually defined benefit pension schemes, annuities or the state pension, is far more predictable.
LiveMore was set up to address this issue. Founded by Leon Diamond, LiveMore began lending in 2020 and aims to be a solutions-based lender for later life borrowers (50 to 90), offering a variety of mortgage products tailored to their specific needs.
This year, the specialist mortgage lender was ranked 52nd in the Business Leader Growth 500 list, following a 721 per cent increase in revenue over the past three years.
Compiled by Robert Watts – the journalist behind The Sunday Times Rich List – The Growth 500 ranks the fastest-growing companies in the UK based on publicly available accounts filed with Companies House. All firms included must have reported annual revenues in excess of £3m in their most recent financial year.
Mortgages for later life
Typically, borrowers turn to equity release products when they reach retirement age, but these aren’t always the most suitable products.
Indeed, most of LiveMore’s borrowers, up to 80 per cent, are remortgaging. They also cater to purchases, often for customers downsizing, moving between properties, or buying a property after a divorce.
The first product the lender launched was the retirement interest only (RIO) mortgage. It is a current pay mortgage, meaning the customer is required to make contractual monthly interest-only payments, and there is no fixed end date to the mortgage. The mortgage is repaid upon the sale of the property, the borrower moving into long-term care, or their passing away.
Simon Webb, managing director of finance and capital markets at LiveMore, tells City AM the RIO mortgage is a “blend of a standard interest only mortgage” due to its contractual monthly interest-only payment, and “elements of an equity release product” because it lacks a fixed maturity date. The term “is estimated based on your mortality date.”
After the RIO mortgage was introduced, Live More added the standard mortgage to its lineup in 2022 and the equity release lifetime mortgage in 2023.
The main challenge that has always stumped banks lending to older borrowers is assessing income. Older borrowers are usually either approaching retirement or are retired, which, in the eyes of most lenders, means they don’t have a regular income.
However, LiveMore has taken a different approach. The firm looks at various income sources, similar to how employed or self-employed income is assessed. These can include the state pension, defined benefit or final salary pension and self-invested pension/income pots. Unlike traditional employment income, these can often be more secure and predictable.
Defined benefit scheme income, for example, is high-quality income, often inflation-linked, accrued from long-term employment. That’s where LiveMore has identified the opportunity. When understood, income in retirement (such as state or final salary pensions) is often “high quality” and “as guaranteed as it’s going to get” due to elements like being inflation-linked, Webb explains.
LiveMore’s solutions-based products
“The vision for the business is to provide it is to be a solutions-based lender for our target market,” Webb says. That means delivering products designed around later life income streams and borrowing requirements.
“What we want to do is provide the right outcome for our borrower, whether that be a standard mortgage, whether that be an equity release product, as long as they have the right cost of the product that suits their needs, the best,” he adds.
This is the reason why LiveMore has tried to focus on building its alternatives to traditional equity release products. “We recognise it’s [equity release] is not suitable for all circumstances and that’s why, you know, the mantra for us as a business has absolutely been to provide a range of products such that the customer is able to take the option that is right for them.”
LiveMore isn’t the only provider to offer these products in the market. The market for later life mortgages is growing rapidly, and LiveMore believes it’s only going to continue to expand as borrowers begin to understand the range of options available to them.
“A lot of the growth of this market… [will come from] education with older borrowers understanding that actually they do have more options than they might actually think that they do,” Webb says.