Pensioner Borrowing Drops as Economic Pressures Mount

The latest data from UK Finance reveals a decline in the total value of new loans issued to older borrowers, totalling £4.3 billion in the first quarter of the year. This represents an 8.5% decrease from the same period last year. Specifically, the number of new loans given out fell to 28,840, marking an 11.7% year-on-year reduction.

A Closer Look at Different Loan Types

The report highlights several key areas within later life lending:

  • Lifetime Mortgages: There has been a significant drop in new lifetime mortgages, which are down 30.1% from last year, with only 5,060 new agreements. The total value of these loans now stands at £410 million, nearly a third less than the previous year.
  • Retirement Interest-Only Mortgages: On a more positive note, retirement interest-only (RIO) loans saw a slight increase. There were 284 new RIO loans, up 1.4% from last year. The value of these loans also rose by 16.7%, amounting to £28 million.

Impact on the Overall Mortgage Market

Later life loans, encompassing both residential and buy-to-let (BTL) loans, accounted for a significant portion of the lending market:

  • Later life residential loans made up 7.9% of all residential loans.
  • Later life BTL loans constituted 22.5% of all BTL loans.

Economic Challenges Facing Retirees

Helen Morrissey, from Hargreaves Lansdown, emphasises that the decline in later life lending still poses a challenge for those planning for retirement. She points out that only 39% of households are on track to achieve a moderate retirement income, based on standards set by the Pensions and Lifetime Savings Association. For a single person, the annual living cost is pegged at just over £31,000, and for a couple, it’s around £43,100. These figures do not include rental or mortgage costs, which could further strain retirees’ budgets.

The BTL Mortgage Dilemma

Some of the lending decline is attributed to BTL mortgages, which are theoretically offset by tenant payments. However, Morrissey notes the rental market is under stress, with an increasing number of landlords exiting the market due to rising costs and difficulties in finding tenants. This could leave retired landlords with significant income gaps.

The Role of Equity Release

Despite a decrease in the number of lifetime mortgages, these loans remain a vital part of retirement planning. Equity release is used by some retirees to fund home renovations or supplement their income, although the specifics of how these funds are used remain unclear.

Long-Term Mortgage Trends

The overall picture shows that a significant amount, over £440 million, of new lending came from borrowers aged over 70. The trend of taking longer mortgages starting in one’s 30s is expected to exacerbate future retirees’ financial challenges. Some may work longer or receive windfalls, but others will face tough decisions about spending in retirement.

Industry Insights on the Fall in Later Life Lending

Ben Waugh of More2life views the decline in later life lending as part of broader market trends and not necessarily alarming. He cites the current high-interest rates and suggests that while some advisors might be waiting for rates to drop, this could be risky given no guarantees of returning to previously low rates.

The Growing Importance of Mortgage Advice

As longer mortgage terms become more common, affecting affordability and extending into retirement years, Waugh stresses the importance of comprehensive advice for borrowers over 55. This includes considering new types of lifetime mortgages and ensuring that retirees secure the most beneficial outcomes for their financial situations.


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