Demographic shifts and changes in lifestyles mean that a greater variety of options are needed
As the demographic of the UK population continues to shift, the housing market needs to adapt to reflect these changes. Not only are people now living longer and often working beyond retirement age, but the hopes and dreams of today’s younger generations are different to those of their older relatives, especially when it comes to home ownership.
We have already seen increased choice and innovation within the mortgage market, with the likes of guarantor mortgages that include family assist and joint borrower sole proprietor set-ups, higher loan-to-value lending and the introduction of retirement interest-only, but the housing market is still falling short.
The government has been pushing to deliver the 300,000 new homes per year needed to close the gap between supply and demand.
However, with house prices still rising year-on-year across most parts of the country, property transactions remaining static and the population expanding, the UK’s housing crisis is not going away any time soon.
At the moment, more than 1.3 million householders are on local authority housing waiting lists across the UK but, in 2017, only approximately 30,000 new affordable homes entered the market.
According to analysis by the Resolution Foundation, the ratio between housing stock and family units is at its lowest level since records began in 1991, when there were 845 homes for every 1,000 families, rising to 867 in 1998, before falling to 825 in 2016.
The lack of available housing has seen the number of families sharing a privately rented home in England treble since 1991, from 550,000 to 1.7 million in 2018.
It is worth noting, however, that homeownership is not necessarily for everyone – nor is it an immediate need. For some people, the long-term aspiration may be to buy, but they are content renting while they save enough money for a deposit. For others, renting is a positive choice due to the flexibility the private rental sector offers.
As such, it is important that the industry delivers a broad range of tenures to cater for all people’s circumstances and different stages of life, whether that be ownership, shared ownership or renting.
At Legal & General, we take a multi-tenure housing approach that reflects the changing needs of today’s population.
We have built upon our existing capabilities to create housing businesses across all needs. These range from build-to-rent and affordable homes to later-living options.
Because customers’ needs are changing, the opportunity for advisers grows; not only to come up with solutions for all life stages, but to make sure that clients fully understand the options and implications at every point of their journey.
Whether advisers have clients who are first-time buyers, movers, improvers, last-time buyers looking to downsize, or renters, it is not just their mortgage needs that they should be thinking about, but also their protection needs.
For example, whether a client is a renter or a borrower, they will need to make sure they have adequate protection in place – not only to ensure that their belongings are protected, but also that their rent or mortgage repayments will be covered if an illness or accident leaves them unable to work.
Legal & General’s Deadline to Breadline research shows employees, on average, would last little more than a month on their savings and, worryingly, more than a quarter said their current savings would last them just one week or less.
The good news, however, is that these challenges represent a huge opportunity for advisers to guide their clients through each and every step of the mortgage journey.
Whether it is inviting their family into the office to go through the different choices available to them or encouraging them to talk to their parents and loved ones about their finances, advisers have the chance to make a massive difference in people’s lives.
And, as the needs of customers continue to change, conversations between advisers and their clients will become even more important.
Craig Hall is head of broker relations at Legal & General Mortgage Club