legal & general home finance

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LEGAL & GENERAL HOME FINANCE

LEGAL & GENERAL HOME FINANCE. How have lenders responded to the needs of older borrowers? Chris Buchanan Product Director 22 November 2016.

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LEGAL & GENERAL HOME FINANCE

A BROAD TARGET MARKET

Chris & Family

Rob & Jen

Jim & Gill

Age 46 & 42

Age 58 & 55

Age 71 & 72

Employed

Early retirement due to illhealth and Jen recently gave up job to act as carer

Retired

Two children of school age 25 year mortgage extends beyond retirement age (71)

Income, made up of pension and benefits Interest-only shortfall

Pension income Released equity to gift a house deposit to granddaughter

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LEGAL & GENERAL HOME FINANCE

THE MAIN CHALLENGES Affordability

Repayment strategy

Health & aging mind

Conduct risk

Regulation

Vulnerability

Funding

Distribution

Mass market solutions

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LEGAL & GENERAL HOME FINANCE

THE MAINSTREAM MARKET Interest-only

Repayment

X 85 75 X 80 Regional building societies removing max age limits and individually underwriting

Mainstream lenders increasing maximum age on standard criteria

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LEGAL & GENERAL HOME FINANCE

THE LIFETIME MORTGAGE MARKET Interest roll-up

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10 11 12 13 14 15

Overpayments

Drawdown

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10 11 12 13 14 15

Interest-only / roll-up

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LEGAL & GENERAL HOME FINANCE

CONSUMER PROTECTION Affordability issues Death of spouse

Unable to transact

Increasing care costs

Dementia

IN CASE OF EMERGENCY CONVERT TO INTEREST ROLL-UP

Vulnerable

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LEGAL & GENERAL HOME FINANCE

INCOME AND LTV SEGMENTATION High

Mainstream mortgage

Debt management

“Hybrid”

LTV

Interest roll-up lifetime mortgage Low Low

Overpayments and interest servicing

INCOME

High

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LEGAL & GENERAL HOME FINANCE

LIFETIME MORTGAGE MARKET GROWTH 2016 Advances £m Growth on 2015

Q1

Q2

Q3

Q4

£393.9

£514.4

£571.6

£520.1

21%

34%

26%

17%

SOURCE: THE EQUITY RELEASE COUNCIL

Exceed £2bn for the first time

Increased product flexibility

Digital apply online solutions

Pricing sub 4% AER

Pricing can be lower than SVR

Partnerships on interest-only solutions

‘According to MoneyFacts, the average market interest rates fell from 6.12% in 2015 to 5.66% in the first half of 2016.’

LEGAL & GENERAL HOME FINANCE

LATEST INNOVATIONS The Family Building Society Retirement Booster: •

Provides regular income in retirement.

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Requires affordability assessments.

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Supplements or “boosts” the income of retirees with proven income.

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LEGAL & GENERAL HOME FINANCE

NO SINGLE SOLUTION EXISTS • Complex customer needs and circumstances • Multiple solutions needed to meet the range of target markets

• Innovation needed in mainstream and lifetime markets • Collaboration across markets • Partnerships across markets

• New distribution routes and capacity

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LEGAL & GENERAL HOME FINANCE

Legal & General Home Finance is a trading style of New Life Mortgages Limited, a wholly owned subsidiary of Legal & General, and is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: 303418).

Registered office: One Coleman Street, London EC2R 5AA Registered in England and Wales number 04896447

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