Lending to older borrowers has long been seen as one of the mortgage market’s toughest challenges, but that dynamic is starting to shift. Today, affordability and complexity are no longer confined to later life. Instead, a growing number of borrowers in their 40s and 50s are facing similar barriers, as longer working lives, changing financial priorities, and more complex income structures reshape what “typical” borrowing looks like.
In this exclusive, Leon Diamond, Founder and CEO at LiveMore Mortgages, explores why the later life lending challenge is fast becoming a midlife issue, and what this means for advisers as mortgages, pensions and wider financial planning become increasingly interconnected.
For many years, lending to older borrowers has been the problem child of the mortgage sector. Driven by a lack of knowledge and understanding about the solutions available, from both consumers and advisers alike, and the increasingly complex finances of those looking to take out a mortgage during their retirement.
But the affordability problems faced by borrowers in their 60s, 70s and beyond are now no longer limited to those age groups. Today, advisers can have as much difficulty finding a solution to suit an individual in midlife as one in later life. It’s a midlife mortgage crisis.
Times have changed. We’re all going to be working for longer than our parents, and some of us may never be comfortable enough to retire. We are all contributing very little to private pensions, and the state pension age is continuing to increase. Plus, people are increasingly opting to invest in a wider array of assets over cash savings. Stocks and shares ISA subscriptions grew by 10.9% in the year 2023 to 2024, for example.
Financially, the tables have turned, and rather than paying off their mortgage, many people in midlife are finding themselves either unable to afford one at all, or too financially ‘complex’ to fit a high-street lender’s exacting criteria. In fact, two in five new mortgages now run past pension age and the largest cohort taking them are borrowers in their 40s.
Consider this alongside the fact that in the UK, divorce peaks in the 40s for both men and women. It’s also the age at which many people start supporting children through university or caring for elderly or unwell parents, or both. The average age of the UK’s self-employed workforce is also 48.
For these borrowers, what’s labelled as ‘complex’ is often just demographic reality: families to support, longer careers, later homeownership and indefinite retirement plans. The industry must adapt to meet the realities of life for this age group.
Not only that, but advisers must take a more holistic approach in general to the financial advice they are providing. As Nikhil Rathi, CEO of the FCA, recently commented, “If we continue to treat pensions, mortgages and savings as separate tracks, we will miss opportunities to help consumers get where they need to be.” As state pensions dwindle, housing wealth will play a more significant role in retirement planning.
And, likewise, as more mortgage terms stretch beyond retirement, affordability needs to be viewed through a different lens – other means of funding need to become mainstream. Pensions, mortgages and savings are converging, and we need to be giving consumers comprehensive advice that reflects that.
At LiveMore, we recently lowered our minimum age limit to 40 to reflect the changing financial pressures for this age group and because we believe our expertise helping ‘complex’ borrowers in later life can be easily applied to helping those in midlife as well. We advocate a holistic approach, which is supported by the LiveMore Mortgage Matcher®’s technology.
The LiveMore Mortgage Matcher® helps brokers build a fuller picture of a client’s current and future financial position, taking into account pensions, savings, investments, inheritance and other income sources, such as rental income from additional properties. This enables brokers to better assess affordability and explore a broader range of potential lending solutions aligned to the client’s circumstances.
The benefits of its solutions-based approach were recognised earlier this year when Mortgage Advice Bureau (MAB) opted to integrate the LiveMore Mortgage Matcher® into their adviser system.
It did so with the aim of helping its advisers to have better conversations with clients about their available options, provide more holistic advice and unlock solutions that might otherwise be overlooked.
Last month, the FCA launched a Later Life Mortgage Market Study “to examine whether change is needed to enable the lifetime and retirement interest only (RIO) mortgages sector to meet consumers’ changing needs”.
In its rationale, the FCA highlighted its support for making advice more holistic, recognising that “consumers may not know about the range of options available to them” and “it can also be difficult to understand and compare several complex options.”
But change isn’t just needed in the later life mortgage market; it’s needed throughout the sector. If people in their 40s are taking out mortgages that will extend into their retirement, the industry needs to be providing holistic, life-spanning financial advice to those people today.
