Putting two and two together: The rise of Later Life Finance
The number of people borrowing money later in life is continuing to rise, David Forsdyke of Knight Frank Finance explains why.
Later Life Finance, which includes Equity Release and Retirement Interest-Only mortgages, is set to play an important part in releasing property wealth over the coming years. There are many factors driving the growth in this sector, but two sets of data in particular have drawn my attention, as together they tell a very clear story.
First of all, our appetite to remain in our homes as we plan our financial futures: according to the Equity Release Council’s recent report ‘Beyond Bricks and Mortar’, 72% of the over 45s want to stay living in their current property as long as possible, and yet 51% of the same demographic see the money invested in their property as forming part of their financial plans for later life.
When you consider these two statistics together, you can conclude that a significant number of homeowners will want to, or need to, release the wealth in their homes whilst still living there.
Secondly, we are all living longer, but saving less. Recent research from Public Health England shows life expectancy increasing and concludes the number of over 85s in the UK will continue to rise. We could see over two million over 85s in 2031. That’s just 12 years away. If we’re all living longer then we will obviously need our financial resources to last longer, especially if our health declines and we need care and support in our final years.
Sadly the decline in pension provision and savings has been widely reported. The ONS UK Household Saving Ratio shows a dramatic decline in savings just in the last three years, and a steady decline since the 1950s. This means we’re living longer but putting less aside.
When you consider these two factors together you can assume many older homeowners, who will have enjoyed considerable growth in the value of their homes, will look to the wealth in their property to top up their income, maintain their lifestyle or pay for their care.
There are of course many other factors influencing the recent growth in borrowing later in life, but these two pairs alone give us a very strong indication that the demand for Later Life Finance will continue to rise.
If you’re reviewing your finances into later life and would like some advice, contact us to discuss your options.