MPs quiz mortgage top brass on lenders failing elderly


A Government select committee has quizzed mortgage experts about big lenders underserving the elderly, lifetime mortgages and advice issues.

The Communities and Local Government committee yesterday called in UK Finance head of mortgages Paul Smee and Family Building Society chief executive Mark Bogard to speak on the topics.

Older borrowers

Committee member Liz Twist asked Smee, Bogard and FirstStop chief executive John Galvin if some firms were reluctant to lend to older people.

Smee replied that “some organisations are enthusiastic”.

But Bogard said larger lenders in particular had two issues preventing them lending more to older borrowers.

He said: “One is a profound fear of conduct issues. If you are a top six lender you do not want to end up on the front page of the financial section of one of the national newspapers kicking a little old lady out of her home. That is PR death for you.”

He said the second issue was that older people were more tricky to lend to, and larger lenders struggled to make that economical.

He explained: “The only way to deal with a mortgage for older people is by looking at them and and being told a story. If you’re one of the top six lenders you just can’t be bothered to do that, because for X per cent of the market it’s just not worth you doing it.”

Smee said he thought this attitude by large lenders would change over time.

High prices

Committee member Bob Blackman questioned the high interest rates associated with equity release compared to other areas of home finance.

Smee said equity release carries extra risk, but that prices could drop in time.

He says: “One of the things that’s happening in the market is better contacts being established between equity release providers and the residential mortgage industry, which will create a better understanding of how those two risks interrelate and over time may lead to different outcomes.”

But Bogard defended equity release costs, saying the product was well-priced for the risk involved.

He said: “To us it seems surprisingly cheap at five point something per cent.”


Bogard said the mortgage market had a separation between lifetime mortgages and normal mortgages that should not exist.

He said: “A lot of advisers will only give advice on lifetime mortgages or normal mortgages. Again, we believe that is a lousy distinction to exist. Because if you go and see a lifetime mortgage adviser, guess what you’ll get?”

Galvin said older homeowners had a disconnect between sources of investment and home finance advice, but that often these needed to be joined up.

Smee told the committee that the mortgage market is heavily intermediated and that older borrowers will also want human advice.

He said: “The issue we have to tackle, and UK Finance, formerly the Council of Mortgage Lenders, published a research report around this – is how to ensure that the advice is given smoothly.

“It’s very difficult for somebody to be told ‘actually we’ve come as far as we can take you and now you need to go and see somebody else’. I think the challenge for the industry is to male the process between investment and housing finance advice as seamless as possible.”

The select committee is trying to find if housing supply is restricted for the elderly and suitable for them.


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