Intermediaries are feeling optimistic but intergenerational lending will continue to play a key role in the market

Intermediaries are feeling a lot more optimistic about the future of the lending market. This sentiment was reflected in the results of a survey we carried out at Family Building Society last month, where nearly two thirds of intermediaries (64%) reported an increase in mortgage enquiries and a 56% increase from those wanting to move. In the later life market in particular, data from UK Finance shows that the value of new loans increased by 17.5% year on year for Q2. And this buoyancy is expected to continue with most lenders expecting business levels to increase over the next six months. Net mortgage approvals for September increased to the highest level in over two years according to Bank of England figures. Following the Bank of England’s decision to cut Bank Rate to 4.75% on 7th November, the second rate decrease this year, this positively is set to continue.

Help for borrowers underserved by the high street

Many intermediaries in our survey felt that certain ‘would be’ borrowers are underserved by lenders, especially those coming up to and in retirement and those looking for an interest-only mortgage. 

Affordability in later life can be more complicated and this is where a specialist lender, especially those that manually underwrite, can help because they’re used to dealing with the grey on a daily basis - rather than looking at numbers in black and white. Many high street lenders will use credit checks and won’t consider earned income after retirement age, or pension income. 

Many of the clients that we deal with are in their late 60s or early 70s and have come to the end of their mortgage term with another lender but are unable to remortgage with them, simply because of their age. Lenders who manually underwrite can look at each application on an individual level. Many will use tailored credit checks to assess affordability and can consider longer mortgage terms into retirement using pension income, pension pots, investment, limited company director's salary/dividends and rental income. 

There are many options for lending into retirement and knowledgeable business development managers are important to understand the best option for an individual client. There are many alternatives to the traditional equity release mortgage, and clients are able to have standard mortgages right up to 95 years on either repayment or interest-only, or use a specialist mortgage such as a joint borrower sole proprietor (JBSP) product where adult children can help them with affordability if needed. 

Being able to discuss each case with a BDM, who in turn is able to speak directly to the underwriting team, is also vital to ensure each client’s application is best placed for approval before it’s even submitted.

Helping younger family members 

Growth in the later life market is driven by many factors – an aging population, the cost-of-living crisis and many lifestyle changes. In particular, our survey highlighted the ongoing need for first-time buyers to be supported by parents and grandparents.

At Family Building Society, we’re seeing an ever-increasing trend of older borrowers using the equity in their home as a gift or loan to help younger family members onto the property ladder. 70% of respondents from our survey commented that the desire for young people to get onto the housing ladder is as strong as ever, with many noting an increase in enquiries about using the support from the Bank of Mum and Dad and other family members. Legal & General’s recent research showed that the Bank of Family reached record levels in 2024 with £9.2bn being gifted, up from £8.1bn in 2023. Their research showed that one in five first-time buyers have to delay their home purchase by more than five years, while 1 in 10 first-time buyers would not be able to buy at all. 

L&G's recent research into the Bank of Family, showed that family support is widening with 13% of financial assistance coming from grandparents and 27% coming from wider family and friends. This mirrors what our business development managers are seeing on the ground and the reason why we recently improved the criteria for our JBSP mortgages – extending family members who can support the mortgage from parents and grandparents to include also aunts, uncles and siblings. 

In the Autumn budget, the temporary reduction to stamp duty thresholds, which were lowered in 2022, were not extended and this relief is due to come to an end in April 2025. The tax-free threshold will revert from £250,000 to £125,000 (and from £425,000 to £300,000 for first-time buyers). This will no doubt have an impact on first-time buyers. 

The government strives to free up property for first-time buyers with its increase in stamp duty on second home purchases from 3% to 5% and believes this measure will help those trying to get on the property ladder. It expects the number of property transactions among these groups to rise by 130,000 over the next five years as a result of the change. However, from what we know of the buy-to-let market, landlords are resilient, especially those with limited company buy-to-lets who are well able to weather the storm with diverse portfolios. 

The main issue is the lack of available housing – through missed new build targets and inefficient use of housing stock already in existence. Reducing stamp duty for downsizers would have gone someway to alleviating this issue and was a missed opportunity in the budget.