Just recently I read that, sadly, the oldest person in Europe had passed away – Maria Giuseppa Robucci, from Apulia, Italy, was 116 years old and put her long life down to three things: a healthy diet, her faith, and the fact she didn’t drink. If that’s the criteria then I’m afraid both I, and a lot of people I know (particularly in this industry), should not start planning too far into the future.
However, statistically at least, there is now a much better chance of receiving that telegram from the Queen than ever before. Indeed, centenarians – according to the ONS – are the fastest growing age group; their numbers have almost doubled since 2002 and the chances of making that three-figure number are now much higher than ever before.
Life expectancy rates for new-borns have continued to rise, although it’s important to recognise that the significant increase we have seen over the past three decades, might not continue for much longer. Again, recent data from the ONS suggests a boy born between 2014 and 2016 will make 79.2 years of age, while a girl would live to be 82.9. That however was only 0.1 years more than the figures for those born in 2013-15, and given the current trend, it may mean that those born in the future actually live less than those born before them.
However, overall, we are tending to live longer and that clearly has implications for our market and, particularly for lenders in terms of our criteria and the options we provide to borrowers. It’s also why we’re seeing the growth of equity release and later life lending options such as RIO mortgages, because of a shift away from the traditional age-related notions of holding a mortgage.
In other words, while previous generations might have looked to have cleared their mortgage by the time they reached retirement age, now – not only is there no clearly-defined retirement age – but the chances of a borrower moving past that age and still having a mortgage are far greater. Add in the greater number of commitments that come in later life, plus a lack of pension provision, calls upon the Bank of Mum & Dad, funding of social care, higher standards of living, etc – and you can see why the later life lending market is perceived to be one of the big ‘boom’ markets over the next decade and beyond.
That shift in the, predominantly, residential space is also being mirrored in the buy-to-let sector, and of course in a very true way it is tied up with the issues facing those moving into retirement, and the use of property as part of the pension plan. Now, it’s much more likely for landlords to hold properties into their retirement, and for them to use their properties to supplement their later life income.
For that reason, lenders like ourselves have needed to shift criteria in order to reflect these changes. Just recently we increased the maximum age for the borrower at the term of the mortgage to 95 years old because we recognise that our landlords – who may be in their 70s – still want to continue to be active in the private rental sector and that as long as they can meet the criteria and affordability, then there is no reason why they couldn’t hold that mortgage up, and into, their 90s.
When it comes to being a successful landlord, then it’s fair to say that ‘age ain’t nothing but a number’ because the fundamentals do not change, regardless of how old the landlord might be. That sort of thinking also led us to drop the minimum primary applicant age for our mortgages down to 21 years old from 25, because it’s important to recognise that anyone, of pretty much any age, may be able to tap into the opportunity to make a success of buy-to-let.
It would seem that those in later life are now much more likely to be comfortable with mortgage debt, either residential or buy-to-let, and as long as they can fit lenders’ stress-testing and affordability constraints, then we (as a community) should be able to offer them lending options. In that sense, this is truly a growth area for advisers and one that is likely to present further opportunity – after all, none of us are getting any younger.
>Bob Young is chief executive officer of Fleet Mortgages