It is time that the industry refreshed its approach to people over 60. The image of people giving up work and then living sedentary lives is out of date, as many over 60s view their mature years as empowering and their retirement as liberating. The new spirit of the older generation is best summed up by a quote from Philip Johnson, the American architect:
“There’s no such thing as old age. I’m no different now than I was 50 years ago. I’m just having more fun.”
This month, I want to take a look at some of the trends that are inspiring a new approach to the older generation and what the industry can do to help.
The 2016 Department of Work and Pensions report ‘Future of an ageing population’ revealed that the number of people working beyond their 65th birthday has more than quadrupled in the last 20 years. There are now a record 1.2 million over 65s working in the UK, while there were just 272,000 in 1997. The potential for earnings has increased substantially over the years.
The report also highlights the need for appropriate housing as the population ages. Suitable housing can significantly improve life in older age, while unsuitable housing can be the source of multiple problems and costs. Poor quality housing costs the NHS an estimated £2.5 billion per year. Adapting existing housing stock to meet this demand is seen as critical, and ensuring that new housing can adapt to people’s changing needs as they age will also be important. Suitable housing reduces demand on the health and care services, enabling people to work flexibly and for longer.
The final trend to consider is that ‘baby boomers’ have acquired great wealth over their lives. A report last year by the Resolution Foundation has revealed a pensions windfall, and the housing boom of the 1990s and 2000s has accelerated wealth inequality between generations. Asset-rich retirees have many options open to them.
What does this mean for the mortgage industry?
The industry has to be creative, and develop new, more flexible ways of meeting the increasingly complex needs of older people. There must be products suitable for:
- over 60s looking to help their children and grandchildren onto the property ladder
- people adapting their homes to make them more suitable
- those needing to care for relatives over 60
If the industry can create mortgages specifically for properties which are to be adapted for the occupants’ changing needs I think more new applications can be expected. These could well come from retirees with part-time jobs. In the past, many standard mortgage providers have classified such applications as extraordinary but they could well become more popular in the future.
More and more deposits could come from the wealth of parents and grandparents. At Saffron Building Society we’ve tried to look at new ways to help and we accept gifted deposits on all of our mortgages. We think it’s an essential way to allow the older generation to help those struggling to save for their first home.
Existing products will also have to be reviewed. Lenders need to be more flexible in their approach to the intergenerational market. I don’t see a reason to have rules which can’t be amended in the product design. For example, why have an age restriction? If the application looks sound from a risk perspective, does age really matter? Clearly, the products have to be compliant and sold in a compliant way, but can the parameters for acceptable be more open?
But this need for flexibility applies to all segments of the market. There is a requirement for greater emphasis on the needs for borrowers of all ages to have more choice available to them. But can the industry adapt?
Many commentators talk about artificial intelligence and how it won’t be long until advice is effectively replaced by computers. But there is a tension between a demand for more flexibility and what robo-advice can realistically deliver. I think a mortgage broker’s service is irreplaceable. Consumers will always appreciate the good judgement and experience of someone investing energy and commitment into helping them to secure their new home or review their mortgage arrangements on their existing home. As the makeup of society and housing becomes more complicated, the industry needs to change. But maybe it’s in ways that are not as simple as first thought. For those organisations willing to take a fresh look, with the flexibility to tailor their approach, the retirement market is likely to hold increasing levels of opportunity.
Head of Mortgage Sales, Saffron Building Society