As more young people turn to their elders for help in buying a home, the industry must react to this groundswell of demand
The industry must think differently about older people to take advantage of a huge opportunity to release much needed cash into the housing market.
The FCA proposes to address six key areas to improve access and choice for older people. Feedback will inform a new ageing population strategy, due for launch next summer.
Historically (and particularly post MMR and MCD), lenders have viewed older people as a high-risk group. However, this demographic often represents a safe bet. They tend to have a guaranteed income in the form of a pension and their attitude to debt means they are less likely to default.
Indeed, the growing need to work past traditional retirement age will mean that many older people will have to earn for longer before starting to collect a pension.
While the FCA is right to step in to tackle the issue of vulnerability, lenders must realise that age-related cautiousness is holding back their businesses. With more young people turning to their elders for financial assistance with a property purchase, the industry must respond to this groundswell of demand.
Some smaller lenders are already making inroads, introducing a plethora of lending-into-retirement products aimed at those aged over 55. A common focus to date has been on versions of equity release repackaged to appeal to consumers with an average age of 70. However, thinking is extending to a wider range of ideas.
In some Scandinavian countries, it is possible for older individuals (usually 75 or over) to transfer ownership of their property to a buyer in exchange for continuing to live there and a monthly fee payable for a pre-determined period. Such products could provide a practical solution to the problems facing younger people today, while releasing more cash into the housing market.
Lenders must recognise that older borrowers can represent a low-risk lending opportunity. The industry has a responsibility to cater for them in the same way it would other sectors of society.
Lisa Watts is legal director and financial services market specialist at Shakespeare Martineau.