"But it’s still significantly underserved,” he said. He predicted the retirement lending market to reach a size of £142bn or more in 10 years’ time.
Scott Gallacher, chartered financial planner at Rowley Turton, said there were good reasons for mainstream lenders to be reluctant to dabble in the market.
“It’s likely to be a relatively small market with complications around the FCA’s affordability rules and potentially vulnerable clients.
“Long-term affordability could also be a real issue if people are on fixed pensions or interest rates rise significantly.”
Ray Boulger, senior mortgage technical manager at John Charcoal thought the new FCA rules had opened up the space for more providers to come forward with retirement interest-only mortgages. He agreed the demand was there.
HSBC, which is handling mortgage requests from people above retirement age on a case by case basis, also thought the market would change in response to the FCA rules.
A spokesperson for the bank said: “We are supportive of the introduction of these new rules, which will enable more opportunities for later life lending propositions, and we are reviewing how we can further support this market following this rule change.”
Santander said it was unable to lend beyond age 75 but refers equity release clients to Legal and General.
“We continue to review our policy and work to support the ageing population,” it said.
carmen.reichman@ft.com
