With consistent advances in healthcare and ever improving life expectancy, there has never been a better time to grow old in the UK.
But for those who are reaching retirement age they are facing housing and financial limitations that are marring their experience.
Borrowing later in life is becoming increasingly appealing to older people wishing to release equity, move home, and pass on wealth to their children, and necessary to others who may have delayed their initial purchase.
However, according to the Building Societies Association, the financial sector and government must think more strategically about how to deal with changing demographics.
This is why the organisation has released an interim report,
Lending into Retirement, to outline the issues being faced by lenders and borrowers and propose some ways forward.
Explaining the findings, BSA’s Head of Mortgage Policy, Paul Broadhead identifies rising house prices as a central aspect of this trend.
“We have seen house prices outstrip earnings for so long people are now facing the prospect of buying later,” he says.
“Many are buying their first house much later in life and they, and others, have to borrow for longer, which will take people beyond what has been traditionally thought of as the retirement age.
Mr Broadhead also highlights the move to “asset-based welfare,” which has seen older people seeking to tap into housing equity to fund long-term care, supplement pension income and help children and grandchildren onto the housing ladder.
“So, there are quite a lot of changes that have happened in a relatively short period of time, all of which have meant that people are turning to their properties for funding, and we need to make sure that there is a mechanism for them to do that, as long as they can afford it,” he adds.
One change that the BSA recommends for achieving this, is the reassessment of maximum age limits, which many lenders currently have as part of their risk management strategies.
According to Mr Broadhead, the limits are not always necessary and people now have “more flexible approaches to retirement, so what may have been appropriate ten or fifteen years ago may not be appropriate now.”
Building societies have made a commitment to review their maximum age policies over the next 12 months or so and the BSA hopes other financial institutions will follow suit.
It makes sense for building societies to take the lead on this, Mr Broadhead suggests, given their “long and proud record of serving their customers, right from when people take out their first financial products as children to helping them buy their final house.
“They have got a lot of experience and trust in building societies is very high. The way building societies are set up, they tend to be more agile when making changes than the large high street banks, because they take a more case-by-case approach when assessing lending decisions and are less reliant on automation.
“So, I think it is right that the sector starts leading this debate, but the sector can’t do it alone.”
As borrowers’ needs change and the sector adapts, so must lending policy, which requires both Government and regulators to act alongside the industry, Mr Broadhead argues.
Although he is optimistic about the level of engagement, he would like to see more action.
He says: “The changing culture from the regulator over the last year or so has really encouraged me that it wants to be part of the debate and make sure that lenders can innovate and customers can continue to be served.
“Clearly their focus is on consumer protection, but what it shouldn’t be doing is locking people out of the market because the regulator doesn’t understand how demand is changing and therefore how solutions need to change.”
In terms of Government, he is calling for departments to work together to deliver joined up policy and broad advice.
“All of these different departments operate in isolation, whereas for customers it’s all the same conversation. It just isn’t joined up and I think people find it really difficult to navigate.
“The first step is to improve the signposting that is available, and then we need to bring things as close together as we can to provide some genuinely holistic advice, which needs to start much earlier.
“It is no good starting to think about these issues during retirement. It is much better to start thinking about this and building flexibility in your financial provision much earlier.”
Homeowners could also be better supported, Mr Broadhead adds, through housing policy.
“You can’t divorce access to finance in later life from appropriate housing and having a range of housing options,” he says.
“This is not about focusing on bungalows on the coast and retirement villages, this is about having the appropriate housing options in the right places. That is really important.”
With life expectancy increasing at an average of five hours a day, now is the time to put strong foundations in place for the future, and building societies are leading the way.