BLOG: Now it’s personal – how tailored solutions are creating more lifetime mortgage clients

Electric cars were on sale a decade ago but who was interested? Few were prepared to overlook high buying costs and poor range for the pleasure of driving a choice of two mainstream models – the modest Mitsubishi i-MiEV hatchback or the tiny Smart Fortwo electric drive.

Fast forward to today and, well, wow! Electric cars are chic, sexy and more practical than ever before. From City runabout to load-lugger, MPV to SUV, luxury saloon to supercar, car buyers are more likely to be asking not if, but when do I go electric?

It may not stir quite the same passion, but the lifetime mortgage market has been undergoing its own quiet revolution in consumer choice, with Just Group introducing flexible new terms designed to meet the varying aspirations of the 21st Century retiree.

Powerful forces are reshaping the retirement income landscape. Returns on cash deposits and bonds often favoured by retirees are at historically low levels. Life expectancy has risen while pension reforms have added both choice and complexity, putting more responsibility on individuals to make good choices to ensure their wealth can sustain them through what for many will be a long retirement.

Whilst this has been going on, low interest rates have helped support rising property prices which is good news for older people due to their high levels of home ownership. Owner occupier rates have risen over recent years to 89% for couple households where both are over State Pension Age and 64% for single households.¹

Property make ups a significant share of overall wealth. Official figure (2014-16) show median property values were £190,000 for singles over State Pension Age (SPA) and £250,000 for couples.² That compares to median pension wealth of £100,000 for those aged 55-64 and perhaps contemplating retirement, and £70,000 for those aged 65+ and likely to be already retired.³

Given relatively modest pension resources, property is set to provide a secondary source of cash in later life for an increasing number of people. Retirement planning and products will increasingly focus on utilising property in addition to pensions and other wealth to meet long-term needs and aspirations.

Of course, advisers working in the real world know that no-one is average. We all have our own unique financial and family situation, our own particular goals and aspirations. House values vary widely and so do attitudes towards how best to use our wealth.

There tend to be three main drivers among those seeking to release equity – to pay for major purchases such as holidays or home improvements, to offer financial support or provide gifts to family members, and to pay-off existing debts. Using housing equity to provide a top up to pension income is often overlooked.

Like all modern consumer products, the lifetime mortgage continues to develop to offer greater choice and scope for personalisation with less need for buyers to compromise. For example, we pioneered the medically underwritten product offering more scope to release equity depending on medical history and lifestyle factors.

In 2018, in conjunction with Saga, we launched a regular drawdown product giving customers access to monthly drawdowns.

The launch earlier this year of our Just For You lifetime mortgage solution offering market-leading flexibility, was another major step forward. Our aim has been to provide a single solution with a range of options, allowing financial advisers greater scope to tailor the plan to meet the unique needs of each client.

Among the new features are a choice of interest servicing options of up to 100% of the monthly interest amount, allowing borrowers who can afford to make monthly payments to manage how quickly interest is added to the overall loan. Customers choosing an interest-serviced option can also take a payment holiday of up to three months in each policy year.

Uniquely, the interest rates are tiered – the higher the percentage of interest serviced, the bigger the reduction to the roll-up interest rate. This gives an incentive to repay some or all of the interest which, over the lifetime of the loan, can lead to huge savings because it gives the opportunity to slow or even stop the rise in the loan as interest compounds. Those not paying interest can still make overpayments to reduce the amount of capital outstanding.

Just For You is built on the idea of ‘one product, many solutions’ because of the flexibility to meet a wide range of needs whether that is to access the most cash possible up front or to release more modest amounts through staged withdrawals.

Many of the improvements are incremental, for example, in recent days we have reworked our offer of cashback to allow clients to borrow exactly the amount they need and no more. We’ve also extended a wider LTV offering into Northern Ireland and offered more scope for clients to take on lifetime mortgages on non-standard dwelling such as sheltered accommodation and mixed residential-commercial property.

Lifetime mortgages have become one of the most exciting parts of the financial services market. We have an ageing population of property owners and an increasing desire for people to maintain their lifestyles through retirement. Historically low interest rates, increasing competition and choice are helping to create a buyers’ market.

Naturally the latest electric supercar will grab your attention, but don’t let that blind you to the lifetime mortgage revolution.


1., Table 3.16
2., Table 3.18
3., Table 6.8

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