July 17 – Later Life Borrowers

There is a lot of effort going into addressing the issues faced by older consumers, and it is encouraging that the industry is making such positive steps together in this area. It is also very timely considering the FCA’s current focus on the ageing population, with its analysis and recommendations due in September.

The recent CML and BSA reports into later life borrowing are an example of the helpful work being done.  Understanding the mindset of later life borrowers is a key starting point when assessing the gaps in the customer journey.  The research identified that most see high street branches of lenders as first port of call, and as long-standing customers they have, understandably, expectations that they will be treated as valuable customers.

It seems there are two issues with this customer experience: firstly that there are restrictions in getting a residential mortgage which are seen as unfair, and secondly that they are left feeling rejected and not knowing where to turn next.  Whilst in an ideal world every lender would offer products to suit all customer needs, in reality commercial decisions drive their offering based on risk appetite and profit potential.  This is why a broker is crucial in knowing which lender offers products appropriate for their customer, which in the later life space will most likely be the more flexible building societies.

It is difficult however to construct a counterargument to the second issue of rejection.  At this key juncture, where customers already do not know where to go, being told ‘computer says no’ without any discussion or signposting diverts customers to a complicated and delayed process of getting the help they need.  Overzealous compliance may cite referral to a specific firm as requiring proper due diligence, however there is no reason why customers cannot be signposted to not-for-profit organisations, consumer guides, intermediaries (as a collective), adviser directories etc.  Customers should not get ‘lost in the system’.

Regulation does not stop firms from having sensible conversations with customers – so many wider discussions can be had without straying into ‘advice’.  A less cautious approach has to be taken, by firms across the sector, in order to help improve customer outcomes.  We should expect regulatory changes to improve transparency and signposting.  Intermediaries should ensure customers know where to go when a firm cannot help them, so there needs to be a focus on building better partnerships.

Whilst the CML later life report contains useful research and analysis, it is a pity that it made high level recommendations.  These could have gone further, such as the need to improve lender rejection processes and to focus on how lenders and intermediaries can have helpful discussions with customers without constituting regulated advice.

Aileen Lees
Senior Policy Adviser