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Why unlocking housing wealth for family support has fallen in 2023

28th September 2023

Hodge data has revealed that between January to July 2023 Retirement Interest Only (RIO) mortgage customers who’re spending their loan funds on financial gifts for family has halved. Dropping from 14% in 2022 to just 7% over the same period in 2023.

So, what could be the reasons behind this fall? Emma Graham, business development director at Hodge gives us her expert insight.

Financial support or family gifting can be for a number of reasons, but we often closely relate it to the ‘bank of mum and dad’ and a substantial sum gifted to children to help them get their foot onto the property ladder. It’s unsurprising that family help is necessary for many when according to The Guardian it now takes the average first-time homebuyer nearly 10 years to save a deposit.

The Bank of England also found a clear correlation between the start of the Covid-19 pandemic and an increase in parental support. A recent Bank of England study revealed that one in four new homebuyers under 25 relied on their parents for financial support.

So why do we think we’ve seen a decrease in the number of our RIO mortgage customers spending their loan funds on financial gifts? Our first insight is further inhouse data which found that customers using the mortgage for debt consolidation increased by 4% over the same period. This suggests that despite parents and grandparents looking to give a helping hand to younger generations getting on the property ladder, they’re also needing to be more conscious of their own long-term financial security and that means considering their own debts going into retirement.

The cost of living crisis is undoubtedly impacting the amount of capital parents and grandparents are willing and able to pass down. Feeling financially secure for us all is important but can be even more so for those who are planning beyond their working life and into retirement.

It’s always been important to us at Hodge to keep a track on how our later life customers are looking to draw on their assets. It’s key to us delivering the right products and brokers offering the right solutions to suit their needs.

The RIO mortgage remains a valuable product to support customers changing needs. In fact, earlier this summer our data showed a near 850% increase in the number of applications we received since becoming the first UK provider to reach the UK market with our RIO product five years ago.

Since then, we’ve trebled our maximum loan size from £500,000 to £1.5million, increased our maximum LTV from 60% to 75%, our minimum age at application has reduced from 55 to 50 years of age, and we’ve made several other changes to improve our proposition from a service and efficiency perspective

Our intermediary partners tell us that consumer awareness of the RIO mortgage is starting to improve and more customers are looking to brokers to help them navigate this area of the market, there is still more work to be done here and as lenders and intermediaries I’m sure we will continue to work hard to support customers looking to lend into and beyond retirement to meet their changing needs.

Always working with you

We may have been one of the first to launch the RIO just five years ago, but we’ve been supporting later life customers with their financial future since 1965.

We use our expertise to create mainstream mortgages for over 50s and into later life. Why? Because we did our research and learned that todays over 50s want more choice, more options and different ways to borrow. We're experts and we know we can help serve the underserved with this expertise.

We work for the better of the borrower, but we're also there for the broker. Being 100% intermediary led, we take time to really help advisers and brokers get to know us, our products and how we can help. We attract both mainstream and later life specialists with our offering.

If you’re looking for a specialist lender, why not speak to the original? 
Contact one of our BDMs  today.

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