The Intermediary – November 2025 - Flipbook - Page 96
L AT E R L I F E L E N D I N G
Opinion
Comprehensive
conversations
needed
M
ortgage customers
hoping for more
base rate cuts by
the end of this
year are likely to
be disappointed
as concerns about the persistency of
inflation seem to have put an end to
further reductions for now. Monetary
Policy Commiee member Catherine
Mann said she prefers a longer hold at
4% following three rate cuts this year
from 4.75% which had raised hopes
that mortgage costs will keep falling.
The pause highlights a major
enduring issue which must be
addressed so that older borrowers
receive the best possible advice.
Advisers, and lenders, should be
encouraging over-50s who are
remortgaging to look at all options,
including later life lending products.
The remortgage challenge
Anyone who took out a fixed rate
deal two, three or five years ago will
likely be facing a significant increase
in monthly costs and sticking on the
standard variable rate (SVR) offered
by their existing lender will be
unpalatable for most.
The Bank of England estimates
around 900,000 mortgage customers
are coming off fixed rate deals in the
second half of this year. On average
they will be paying around £146 a
month more. Customers who took
out 5-year fixed rates in 2020 will be
in for a particular shock, potentially
doubling monthly payments.
Average 2-year fixed rates are
around 4.96% and the pause in base
rate cuts means they are unlikely
to move much further down. That
could be challenging for all borrowers
looking for a new deal, but it will be
particularly challenging for older
homeowners looking to remortgage.
90
The Intermediary | November 2025
WILL HALE
is CEO at Air
Many may have experienced a major
change in circumstances since they
last remortgaged, such as stopping
working full-time or even retiring.
They will now have a lower income,
which may make it more difficult to be
accepted for the best fixed-rate deals.
There may be a temptation to stick
on the SVR and see if there is a change
of heart at the Bank of England.
However, that can be an expensive
strategy, with SVRs as high as 8%
meaning the increase in monthly
repayments is likely to be much
higher than the £146 a month average
estimate from the Bank of England.
More simply, however, another
fixed rate mainstream mortgage may
not be the right option, depending on
their needs, wants and circumstances.
It is vital that all customers over
the age of 55 do not just default to
a new product with their existing
lender, or even a new lender, when
they remortgage, but instead talk
to an adviser who can consider all
their options.
It is a message that is geing
through to some extent – Equity
Release Council data shows around
48% of later life lending customers
are aged 55 to 60, and more than 73%
are aged 55 to 65. But much more
needs to be done by advisers in the
mainstream mortgage market, and
it must be driven by comprehensive
conversations and a beer awareness
or understanding as to the full range
of products that may be appropriate
for an individual.
Mainstream mortgage advisers
who do not include all later life
lending products within their scope
of advice should still have a wide
field of vision to ensure that products
such as modern lifetime mortgages,
retirement interest-only mortgages
(RIOs) and term interest-only
mortgages (TIOs) are still considered,
even when customers meets
affordability criteria on standard
products. For customers over the age
of 55, affordability should no longer
be seen as a binary concept. As an
example, lifetime mortgages that
allow customers to serve some or all
of the interest or make ad hoc capital
repayments can be a suitable option,
even when eligibility for a mainstream
mortgage can be achieved.
Lifetime mortgages come with
added protections, such as certainty
of tenure and a no negative equity
guarantee, and for many customers
can support more financial freedom,
a beer lifestyle and overall improved
outcomes – even if the cost of
borrowing may be higher. However,
it needs to work the other way as well,
and equity release specialist advisers
must not shoe-horn customers into
lifetime mortgages if products such
as RIOs, TIOs or some of the building
society products aimed specifically
at older borrowers can deliver good
outcomes at a lower cost.
With modern lifetime mortgages
increasingly suitable for a growing
number of customers, they should
be seen as a central part of holistic
mortgage advice and broader
retirement planning.
If mortgage advisers are unable
to offer all options, they should at
the very least have a trusted referral
relationship with a specialist. This will
enable all advisers to deliver a holistic
proposition, irrespective of their scope
of advice, and good outcomes for
their older customers no maer what
happens with the base rate. ●
