If you were looking for your first home in the 1990s, the range of mortgages available would have looked radically different. Those first-time buyers are now firmly planted in middle age and have a completely different set of challenges when it comes to housing, mortgages and their families.
A study into the happiness of people across different age groups identified that people in middle age are often the most anxious and unhappy people in the population. Those aged 45 to 59 reported the lowest levels of life satisfaction, with men on average less satisfied than women1. Researchers said one possible reason for the lower well-being scores among this age group might be the burden of having to care for children and elderly parents at the same time. The changes to the economy and lifestyle trends has had a significant impact on this group in the UK.
Support for children
The ‘Bank of Mum and Dad’ has been an increasingly influential lender in the UK housing market. In 2018, it was the equivalent of a £5.7bn mortgage lender2. Research suggests that it is supporting more people than ever before. 27% of all buyers received help from friends or family in 2018 which is up from 25% the previous year. This accounted for the purchase of nearly 317,000 homes.
Estimates suggest that one in four housing transactions in the UK are dependent on support from parents who are helping their children with a deposit. However, if the squeezed middle continues to find it tough financially then this source of investment could dry up and that would be an issue for the first-time buyer market.
Those approaching retirement and retirees have very different views about their lifestyle and expectations have certainly changed over time. Retirement plans may have once have extended to spending time at the allotment or a round of golf. However, those approaching the last third of their lives hatch plans that were unimaginable to their parents and grandparents, and there is a desire for much more. People stay healthier and more active for longer, they want to travel and even continue work in a part-time capacity. This gives them different aspirations and options. The over 65s are set to account for a quarter of the UK’s population within the next 25 years3. Currently, 6.5 million households in England are headed by someone aged 65 and over4.
As the population ages, so will the UK workforce. A report from the government which looked at the ‘Future of an Ageing Population’ claimed that the productivity and economic success of the UK will be increasingly tied to that of older workers5. Their conclusion is that enabling people to work for longer will help society to support growing numbers of dependents, while providing individuals with the financial and mental resources needed for living longer. The report concludes that to maintain the nation’s economic wellbeing, it will be critical to support fuller and longer working lives, removing barriers to remaining in work, and enabling workers to adapt to new technologies. Those in the middle of their lives can expect to remain in work for longer in a more flexible workforce
Mortgages for the middle aged
The needs of the middle aged are very different when it comes to housing and there is a responsibility, and a large opportunity, to help this segment of the mortgage market. We have seen two distinct trends emerging.
At Saffron Building Society, our conversations with customers have shown that many want to be able to efficiently support their families financially in the early years of home ownership. However, rather than just simply gifting their children and grandchildren the money, they want to lend it with a view to being able to have the money returned years later. These funds are often needed for retirement and may also be earmarked for care costs for elderly relatives. Customers often want this to be an easy to use facility where the lender manages the process rather than having to draw up legal agreements.
The second trend we are seeing is for lending into retirement. When people have so much equity in their property they are looking to release this value to support their lifestyle, retirement or family members. This is not just a call for equity release although that is clearly one of the options. The difference is that the mortgage might work on an interest only basis with a view to downsizing your property to pay off your loan after you are semi-retired or have stopped working altogether.
We have developed specific products to help customers. For brokers, I think there will be a large and growing opportunity as it’s not uncommon for people with these needs to have complex circumstances. The expertise a broker can bring is critical and highly valued by potential customers. In the future, we expect this sector of the market to grow.