Many years ago, in 2012, we had the opportunity to share a day with Colin Taylor, the CEO of Key Retirement Solutions—the leading independent lifetime mortgage advisor in the UK at that time—to exchange experiences and gain mutual knowledge of the sector in our respective countries.
We already knew then that the UK had many more years of market development and that the lifetime mortgage was completely “normalised” there, but we wanted to delve much deeper, in both qualitative and quantitative terms.
Perhaps what reflects most clearly that it is a much more mature market than the Spanish one is the fact that more than 22,000 lifetime mortgage operations were carried out per year, more than 1,000% more than those carried out in Spain at that time. Today, almost 14 years later, the differences remain very significant, although smaller. Different realities exist in both markets, both on the demand side and the supply side.
Differences on the supply side
In the UK, the providers are mostly insurance companies, unlike what happens in Spain, and they do promote the product there, as they have a background of many more years and therefore have much more limited risks. Insurers see the lifetime mortgage as a very attractive asset in which to invest the mathematical provisions of certain liability products.
Furthermore, companies refer operations to independent advisors so that clients can receive transparent and professional information and take the best decision. The figure of the advisor is much more developed throughout the British financial system, where clients always go to an advisor before seeking advice from their bank—a behaviour very common in Spain, although it is also true that since the financial crisis, this happens less and over.
The products, although similar, also present differences. We could conclude that in the UK there are more options when choosing a plan, as they can choose between products from more than 12 entities, including modalities of a single lump sum, monthly payments, drawdown (flexible access), credit line styles, products where only interest can be paid, etc. In Spain, although there is considerable flexibility, the number of providers is not as wide; and although there are some insurers that offer the product—which are the entities that should drive the supply—they do so with very limited ambition.
Differences on the demand side
This difference in the various plans means that the client profile is also different. While in Spain the average age is around 75 years, in the UK 75% of clients are under 75 years old.
The reason why clients take out a lifetime mortgage in the UK is also surprising; most carry out the operation to make home improvements and go on holiday, compared to the Spanish case, where the driver for the operation is being able to pay current expenses more comfortably, cancel debts, and pay for care services.
These figures also reflect a significant difference in the mindset of seniors; in a country with more financial culture and where people do save through private pension plans, the home is considered as just another asset from which to obtain income and thus improve the quality of life in retirement. They do not have the emotional attachment “to the bricks and mortar” that we Spanish people have, nor do they consider it necessary to leave their heirs a home free of charges as a process of personal fulfilment. In Spain, by contrast, many people remain clung to the idea of leaving a property free of charges as an inheritance, even at the cost of struggling during retirement, although as we have also seen at Óptima Mayores, more and more people consider their home a form of savings to be used to improve their quality of life.
The lack of knowledge about the product in Spain on the demand side is likewise a very representative difference. In our country, the lifetime mortgage is very commonly confused with home reversion, and among the few who say they know what the product consists of, the most common and mistaken answer is “the mortgage is that product through which the bank gives you money and when you die, it keeps the house.” We recommend the post False myths of the lifetime mortgage.
Despite all the above, the reality is that in Spain lifetime mortgages are offered with very good conditions and great flexibility in the options for receiving the money. The increase in knowledge about this product, combined with the testimonials of those who have already improved their quality of life, is driving a market with enormous growth potential, not only in Spain but across continental Europe. And at Óptima Mayores, we will continue to accompany all our clients to do so in the most efficient way, as we have been doing for 20 years.
