The Importance of Understanding Customer Trends to Deliver Best Outcomes

As we enter the last few days of the year, it’s safe to say that 2024 has been a year of challenges for the later life lending sector and while the outlook has brightened significantly over the second half of the year, it has felt more like the first rays of light appearing between the branches of our industry forest rather than us fully emerging into the clearing.

As counterintuitive as it sounds, it could be argued that recent market conditions have presented their own form of opportunity in terms of affording the later life lending sector the ability to fully embed Consumer Duty and focus on delivering best outcomes for those who are exploring their options.

But delivering those outcomes begins with understanding your audience, which was the ethos underpinning our research report, The Evolving Lifetime Mortgage Customer: an exploration of changing equity release demographics. We wanted to set out to better understand how our customer profile had changed over the past five years, and having done so we felt that it was important to share our findings to help widen understanding across the sector and help drive positive experiences for those exploring ways to achieve their financial goals in later life.

The question is, what did we learn?

Age

What’s undoubtedly true is that the average age of a lifetime mortgage customer has been getting younger, decreasing from 73 in 2018 down to 69 over the first half of this year.

Breaking down age into separate brackets, meanwhile, has shown that the proportion of new customers coming from the 60-64 age bracket has increased 12% over the same period, while new lifetime mortgages being taken out by those aged 75+ decreased from 46% to 29%.

It’s important to note that a younger age profile doesn’t necessarily also mean an increase in people from lower socioeconomic groups – something that became apparent when we examined other key demographic markers, such as house values.

The counterpoint could be that modern, flexible lifetime mortgage solutions have meant that people are more comfortable taking out

House values

House values among new customers offer perhaps one of the most clear-cut indicators of the evolving picture of the modern lifetime mortgage customer, with our research showing a 42% increase in the average value of a home owned by a new equity release customer between 2018 and 2024 – in raw terms this represents an increase of over £122,000, from £293,680 in 2018 to £415,746.

It’s also noteworthy that we found that the average house values grew at a rate faster than national house price average shifts, meaning that any increases were on a net basis. Most of the growth occurred in mid-value property bandings, with nearly 4 in 10 new customers residing in homes valued at between £250,000 and £400,000. Meanwhile, the proportion of business coming from owners of £1m+ properties has consistently sat at 4-5% throughout the period examined.

Loan usage

Throughout our data set home improvements have remained the most popular release for releasing equity from homes by over-55s and consistently accounting for around 25% of new plans taken out. However, at least one in five people have also taken out a lifetime mortgage for debt and mortgage repayment, and that’s been rising slightly in the last couple of years to almost sit at a similar level to home improvements, at 23%.

To highlight the diverse range of needs modern lifetime mortgage plans currently meet, the other most common reasons for taking out a new lifetime mortgage were for gifting to family and friends, car purchases, and holidays.

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Our findings have only served to underline the rapidly evolving lifetime mortgage customer, and the important role that understanding these trends has in helping to best serving those exploring later life lending.

If we, as a collective industry, are going to deliver best outcomes for consumers and provide the best possible experience, then that journey begins through learning more about who those taking out lifetime mortgages really are, not to mention the underlying trends and patterns and the ways they could potentially affect future activity patterns.

The information provided forms a small part of our recent research report, ‘The Evolving Lifetime Mortgage Customer: an exploration of changing equity release demographics’ – to download your copy, visit our website.