A total 44,130 later life mortgages were taken out in the third quarter, representing a 7% decrease in mortgage volumes compared with Q2, new figures from UK Finance have shown.

The banking body’s latest report, which revealed that total lending for Q3 hit £6.46bn, did reveal that the third quarter’s mortgage volumes were still a 6% rise compared with Q3 volumes last year.

UK Finance suggested overall quarterly reduction was a result of declines in the number of mortgages taken out by those aged between 55 and 69. This was reflected by lower house purchase volumes in the wider housing market and coincided with the winding down of the government’s stamp duty holiday.

Lending to borrowers over the age of 70 was stable, however, with UK Finance suggesting that these borrowers access the market primarily through products that are not related to house purchase, such as those involving equity release.

“Following the end of the stamp duty holiday, mortgage lending to over-55s declined 7% in Q3 compared to the previous quarter, mirroring the wider market,” UK Finance director of mortgages, Charles Roe, commented. “However, there was a slight rise in lending to those aged over 70 as people sought to release equity in their property rather than moving home.”

According to the report, retirement interest-only (RIO) mortgages, which were launched in 2018, started to grow in popularity in 2021 as more borrowers entered the market. UK Finance stated that these are low compared to other later life products, which is due in part to challenges for many borrowers in meeting the affordability requirements for a RIO mortgage.

While it can be difficult for borrowers to switch from an interest only mortgage to a RIO mortgage, RIOs are still an alternative product to lifetime mortgages, and the banking body suggested that lenders are providing these products where a lifetime mortgage may not be the best fit for the borrower – such as when the customer is looking to borrower at slightly higher LTVs).

Roe added: “Our focus on RIO mortgages shows they have grown in popularity since their launch in 2018. These products provide a good alternative for customers where a lifetime mortgage may not be the best fit, however, take up is lower than other later life products due to affordability.”

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