The UK's later life lending market in the UK is worth up to £153.9bn, an AKG Financial Analytics research paper has estimated.

Sponsored by and produced in collaboration with Key Group, the research paper also highlighted that £54.9bn worth of new lending and product switching took place in 2021 alone.

The research paper also showed that over-55s have mortgage borrowing – standard, RIO and equity release - of around £99bn while annual new lending across all products is worth up to £14.9bn and product switching valued at a further £40bn a year. With the paper highlighting general agreement that the need to borrow ‘in’ and ‘into’ retirement will continue to grow, it identified areas that needed further development if an optimum consumer outcome is to be delivered. These included:

• Greater consumer education on if, when and how, property will play a role in their retirement planning;
• Properly integrating the discussion on property wealth into retirement/decumulation processes;
• Bridging the advice gap between standard mortgage and specialist Later Life Lending advice as well as between siloed mortgage and investment advice – crucial if the market is to meet a growing customer demand;
• Consider how the market will provide the ongoing training, qualifications and regulatory oversight required to support an increasing number of advisers looking to offer more holistic solutions;
• Encouraging trusted sources of guidance and support such as Citizens Advice and the Money and Pensions Service to develop their holistic Later Life Lending - and wider property related retirement planning - support accordingly;
• Further product development based on research and customer data/knowledge. The increased expectations within the proposed FCA Consumer Duty will have an impact here.

Research for AKG in the research paper found more than half (51%) of advisers had seen an increase in demand for advice on later life lending in the past year and 58% expect a rise in demand over the next 12 months. The study found demand is expected to continue to build – 77% expect a rise in the next two to five years and 79% in the next six to 10 years with 30% banking on a substantial increase.

Advisers surveyed estimated that on average nearly a third (30%) of their customers aged 55-plus had outstanding mortgage debt with a quarter (25%) also having other debts.

This view is further supported by the consumer research which found that 14% expected to repay their mortgages between the ages of 65 and 70, while worryingly around one in 10 (9%) did not know when they would clear property debt. Around a third (35%) welcomed the ability to borrow in later life.

Overall, when asked about their confidence in achieving a comfortable retirement, only 11% of consumers said they felt they were financially prepared for that stage of their lives. Instead, 21% said they were quite well financially prepared but cautious about bills while at the other end of the spectrum 22% didn’t think they were financially well prepared and were concerned about this.

Matt Ward, communications director at AKG said: “While we are pleased to be in a position to unveil an assessment of the size of later life lending in the UK, it has not been without its challenges. To achieve this we have sought to estimate the full extent of the whole later life lending market through a combination of the established quantified component parts. However, this lack of consistency around a later life lending definition and definitive data sources has highlighted the challenges faced not only by businesses keen to engage but consumers looking to access their housing equity.

“The industry needs to focus on further tightening this understanding, through better coordination of the data and participant agreement on the market’s component parts. Such an ongoing revisionist exercise is of benefit to advisers and their clients in what is a large, important, and evolving market, which will be at the heart of delivering positive customer outcomes in retirement and later life.”

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