There was strong growth in lending by equity release firms and other specialist mortgage lenders last year, as the demand for later life borrowing increases, according to trade association UK Finance.
In a blog on its website, it said gross mortgage lending totalled £268 billion last year, up 3% on 2017.
Patterns of borrower incomes have become more complicated, it said, partly driven by a growth in people being self-employed as well as an ageing population with more people working for longer.
The blog said: “In this changing environment, lenders who have more bespoke, often manual, underwriting processes are well placed to help these customers.”
UK Finance’s figures show lending by equity release specialists increased by £800 million between 2017 and 2018.
And its figures relating to older borrowers show 78,514 new residential loans were made to borrowers aged over 55 last year, with 42,866 new equity release loans made to this age group.
Equity release covers a range of products which allow people to access the equity – or money – tied up in their home.
But while an immediate cash boost could be useful in some situations, there are important longer-term factors to consider.
For example, borrowers may find they might not be able to rely on their property for money needed in retirement, or that they will have less than they wanted to pass on as an inheritance. Borrowers may want to take independent financial advice when weighing up their options.
UK Finance said that, in a sign of growing competition for borrowers’ business generally, 70 lenders each provided more than £50 million of mortgage lending to home owners and landlords in 2018, up from 65 lenders the year before.
Lloyds Banking Group remained the UK’s biggest mortgage lender last year, followed by Nationwide Building Society in second place.
The blog, written by UK Finance analyst Callum Bilbe said: “Lenders have seen a higher demand for mortgages from older borrowers in the last few years, extending their maximum age criteria and adapting underwriting for those whose income in later life is more complex.
“This has facilitated a competitive and expanding mainstream later life lending market.
“This is also evident within the equity release mortgage market, where we continue to see strong growth. This is driven in part by investment from firms in the life and pensions space, for whom the long-term income stream from equity release mortgages aligns well with their liabilities.”
By Vicky Shaw
Source: Yahoo Finance UK