Neil Forrest: Continuing innovation in the UK Lifetime mortgage market

The UK Lifetime mortgage market now has around 25 lenders, with new players entering every year.  These include Banks, Building Societies and Life Insurance companies as well as smaller specialists.  The market has shown considerable innovation over the past few years, with product types now falling broadly within four groups; lump sum fully drawn, drawdown facilities, income top-up and hybrids.  These have evolved to meet the differing needs of the main identified borrower types, which are ‘debt consolidators’, ‘lifestyle enhancers’, ‘income shortfallers’ and ‘financial planners’. 


Borrowers, of course, rarely fit into a single category and the newer hybrid products  allow e.g. a typical borrower to raise an initial lump sum to fund a home improvement and pass cash to children as part of inheritance tax planning, arrange a facility for a known future lump sum need, such as a trip to Australia to see relatives and also arrange a regular monthly income to top up a pension and improve their general standard of living, all within a single loan agreement. 


The process of innovation is expected to be on-going, because the UK market is still immature and the expected penetration levels have not yet been reached.  Lenders are therefore taking the view that a steady stream of new product ideas is required, until the point is reached where we understand the borrower needs  / product match better, the most successful products then begin to dominate, the weaker ones are dropped and the market becomes more commoditised.  This stage in the market’s evolution may still be some years away, however the number of active lenders with new product ideas means that this may be reached faster than for other jurisdictions.


Neil Forrest is Independent advisor at NRF Consulting, UK. He has been working as a counsellor to banks and other lenders looking to enter or expand their presence in the market, focussing on product design, funding and risk hedging for several years.


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