Master Later Life Lending - By Air

How Are Rising Interest Rates Shaping the Future of Later Life Lending?

• Paul Glynn • Season 2 • Episode 1

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Discover the untapped potential of later life lending in a world of rising interest rates and economic challenges. Join us as we promise to unravel the complexities of this evolving market landscape with insights from industry leaders Mike Batty from Legal & General and Alistair McQueen from Aviva. We tackle the critical question of how to navigate an aging society's financial needs, with a spotlight on the immense wealth tied up in private housing and the need for innovative financial solutions to support a growing population of centenarians.

As life expectancies stretch, traditional financial planning falls short, demanding a fresh perspective. Explore with us the shifting dynamics between younger and older retirees and the impact of family involvement in financial decision-making. Our conversation emphasizes the crucial role of financial advisors in adapting to these changes, especially in light of the FCA's consumer duty guidelines. We challenge the industry to prioritize customer education and collaboration, fostering an environment where property wealth becomes central to financial planning.

Embrace the revolution in financial products aimed at later life, where trust, transparency, and reassurance are paramount. With fluctuating interest rates and unpredictable economic conditions, we stress the importance of focusing on clients' immediate needs, rather than relying on speculative forecasts. This episode is your guide to understanding the transformative power of consumer duty and the opportunities it presents for growth in later life lending, ensuring a secure and fulfilling retirement for millions.

The Master Later Life Lending Podcast is aimed at qualified advisers in the mortgage or financial services industry. 

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Paul Glynn:

Welcome to Master Later Life Lending, the podcast where we explore the latest trends, the challenges and the opportunities in the later life lending market. I'm your host, paul Glynn, and whether you're an equity release specialist or a mainstream mortgage advisor, this show is designed to help you stay ahead of the curve as you navigate the unique needs of older clients. In this episode, we're asking the question how are rising interest rates shaping the future of later life lending? Having seen interest rates rise, property values fluctuating and the cost of living climbing, the later life lending landscape is evolving rapidly. Today, our expert guests are Mike Batty from Legal General and Alistair McQueen from the Investment Division at Aviva. Mike and Alistair will dive into how these broader economic trends are impacting both advisors and their clients and what you can do to better serve this growing market. We'll also be covering emerging product innovations, demographic shifts and the regulatory landscape to help you make more informed decisions for your business and for your clients. So let's get started. Welcome, beth, nice to be here.

Alistair McQueen:

Hi there, nice to see you.

Paul Glynn:

Alastair, can I come to you first just to explain to our viewers and listeners a little bit about your role at Aviva, just for some context.

Alistair McQueen:

Yeah, well, it's great to be here Aviva large operation, but I work in what we call our wealth division and our responsibility is to help our 6 million customers in the UK save for and live in retirement. Customers in the UK save for and live in retirement and therefore I'm part of the leadership team of that business, ensuring we're there for people as they're working towards retirement and, in this case, living in retirement across the full range of products that we serve. And I've got a responsibility for ensuring our voice is heard and our customers' voices are heard by government regulators and policymakers.

Paul Glynn:

Thanks, alistair and Mike. Tell us a little bit about your role at Legal General.

Mike Batty:

Thanks, paul. So yes, I'm Mike Batty. I've been at Legal General for seven years, most recently as a products and properties director within our retail division. I've previously worked within our lifetime mortgage business as a finance director for a number of years within our financial advice business, so a whole host of experience across a number of retail products within LNG.

Paul Glynn:

Brilliant. Looking forward to hearing more about all of that from both of you as we move through the session today. So let's get into the questions, which are what our listeners are going to be interested in. So let's start off with a first one around how interest rates are impacting the later life lending markets. So let's start with the first question for both of you how has recent easing of inflation and cost of living pressures impacted the demand for equity release and for other later life lending products? Alistair, can I come to you first on that one?

Alistair McQueen:

Yeah and I think you used the word there, paul easing, and I think positively. We are seeing an easing of both inflation and of interest rates. Just this morning, as we've been recording this, the governor of the Bank of England has suggested that there may be an acceleration of the easing of interest rates, which I'm sure is music to the ears of our market and many of the clients and customers that we seek to serve out there. That's encouraging news, but I don't think we can just look at inflation and interest rates in an isolation. There's a very swirling volatile world out there beyond just those two metrics, and so we ain't out of the woods yet. I think.

Alistair McQueen:

Before looking at those immediate metrics, I think it's worth just stepping back and recognizing the hugely volatile times that all of us and our clients have been through, not just in the last two years, but, I'd suggest, over the past decade. We've had a global financial crisis, we've had a global pandemic, we've had war in Europe. Those three events alone could be labeled as one in 100 year events. Yet we've had all three of them in little over a decade, and that has brought a huge amount of volatility to our market and our customers, and so it's natural that we have seen, as is well reported, a reduction in the volumes flowing through our market in the past year to two years, but I am still passionately of the belief that this is a market that will only grow over the long term and therefore the challenge for all of us is to hold our nerve through these difficult times and look at the fundamentals that drive the demand that there is in this market.

Alistair McQueen:

This is a market that carries huge opportunities. I think I was reminded recently that if you look at the Chinese symbol for the word crisis, there are two strokes in that symbol. One stroke signifies danger and the second stroke signifies the word opportunity, and we are navigating difficult, difficult and delicate times, but that time brings opportunities for those who can see them and those who can grasp them. So difficult times, we are seeing some stabilization in those markets. The world around us is uncertain, but uncertainty and the fundamentals behind this market brings opportunity for all of us.

Paul Glynn:

Thanks, alistair. So opportunity is definitely something that we want to revisit as we go through the conversation today. So, mike, what's your take on that kind of wider question that we just posed for Alistair?

Mike Batty:

So yeah, I think I would definitely echo a fair few of the points you've touched on there. I think that the volatility has been incredibly challenging on a number of different fronts and, actually looking forward now, what I think we need is a bit of a stable period that will really help this future growth. I think we've seen it previously in the market where decisions such as even Brexit and then obviously we talked about the global pandemic During these times, people don't want to transact, they get nervous, and when they get nervous, they get hauled off making those really big life decisions. Um, and so, actually, if we could have a period of stable markets, stable interest rates, stable inflation for a period of time going forward, I think that would really help this market. And even you know one thing to touch on, interest rates are particularly they're higher than they have been. Um, I don't think interest rates necessarily need to come flooding down too far. I think they just need to really actually stabilize and stay at a period where actually, yeah, people get used to them, they normalize and people understand. Actually, this is a sensible thing to do in this market. I shouldn't be trying to wait for interest rates to come down to the record lows that we've seen previously. I should start thinking about what do I need to help my retirement?

Mike Batty:

I think one of the things you touched on is yes, obviously inflation is moving in the right direction, interest rates are moving in the right directions. There is still a cost of living challenge out there and actually one thing that does kind of benefit this market in some ways. I think people need this product to help supplement their retirement. There's a whole trend of underfunded retirements in the UK at the moment and actually being able to take products like a lifetime mortgage or a retirement intergenerational mortgage will really help supplement those retirements for the people who aren't quite able to afford it. So, yeah, I think they're probably the two key themes. They link quite nicely into things you were saying, alistair.

Paul Glynn:

Yeah, I mean we see that same sort of theme across our regular conversations with our advisor members, where they are a resilient bunch. So, whether that's the different type of crises you've just outlined, alastair, or it's the, you know, the wider, longer term thinking that's required to support a customer through retirement, then they do adapt. That's the nature of the advice process. But they are grappling with those macro factors and I think some of the the answers that that you're given so far and the conversations that we'll explore as we go through this session should keep give people food for thought on what that opportunity looks like. Because, as you said earlier, alistair, out of out of a crisis can come an opportunity, but we need to be aware of the dangers.

Alistair McQueen:

So and let's remain just sales. I think it's all. In these times it's always helpful, I think, to remember focus on the things that we can control. None of us on this call and none of those listening can directly control interest rates or the movement of inflation or geopolitical events. If we tried and sat here to think we're going to try and control all of those, we would drive ourselves insane. But we and those on this call have got more control than any over the needs and interests of those that they serve, educating those that they serve, supporting those that they serve, and there's people out there doing brilliant work and hats off to those who have navigated these really challenging times over the past period and that experience should give them all, and us all, confidence. This is a resilient market and one that is starting to show positive signs of regroup and regrowth, and therefore that should give us all confidence and, as I would stress, the fundamentals that underpin the need for this market are strong as they've ever been.

Mike Batty:

I think, just building on the opportunity bit that you've touched on there, the volatility has driven some levels of innovation in the market that maybe we wouldn't have seen going forward. It's been really good to see various lenders listening to the advice community and thinking about actually, given what's happening out there, given rates are higher, what do we need to help customers? And we've seen all kinds of new products in terms of interest servicing, repayment, all those sorts of things brought out, and actually that just demonstrates that you know the market. Each segment of the market is listening to each other. Advisors are saying to the lenders what do they need, and lenders are trying to support those needs by bringing out new things to help them going forward.

Paul Glynn:

So I think it's really good to see that as well, which maybe we wouldn't have seen had the market not been so volatile I think we've got to look back at the last 18 months and see the sheer amount of change and innovation from organizations like you know, the two of yours where you know those brands are supporting that, that change process in in a way that we're seeing new products, we're seeing, you know, more granular approach to pricing. Lots of different things are coming through. So, if we can just take the conversation in a slightly more narrow direction, so a question for you, mike what role, given that backdrop of complexity we've just outlined, what role do demographic shifts such as an aging population and a longer life expectancy play in shaping the future of the later life lending market? Because you as organizations must have to factor all of that into that great product design we just talked about yeah, I mean the.

Mike Batty:

The demographic is evolving massively. I think the last that I was given was 21 million people over the age of 50 at the moment. Actually, I've listened to a couple of podcasts, and some of the really poignant points that have been brought out have been just how long you spend in retirement these days. At that point around actually age 50, you're only halfway through your adult life. That really resonated with me when I was listening to that on some of the earlier podcasts, and I think it's really important.

Mike Batty:

Actually, given how long that time period is now, it's not going to be a one-size-fits-all solution. There's going to be all sorts of things that happen during that time, so we need to make sure that the solutions there in the market are meeting those evolving customer needs as they go through that journey, not just at one point in time. They're going to have a whole host of different needs throughout that journey which are really important to them, and you think about, actually, the percentage of those people that's going to be vulnerable going forward. I mean, the stats on that are something like 50 percent of the population, uh, of the adult population, are vulnerable. Um. The more important stat to me there actually is, though, that three quarters of those don't actually realize they're vulnerable in any way. So if they don't understand their own vulnerabilities, there's probably almost more ownership on us, as lenders or advisors to think about.

Mike Batty:

Well, actually, um, what, what can we do to help bridge that gap in terms of their knowledge and support them through that journey and make sure they understand what they, what their needs are, and, in terms of the products we bring out, it's making sure that it meets their needs in terms of the, the, what they use it for. Do they understand what they can use it for, how they can use it, whether they can repay over time, whether they can use it to adapt their house, whether they can use it to fund care needs? There's all sorts of different things they need to understand more, and, as providers and advisors, it's how can we actually sort of provide insight for them to understand that a bit better?

Paul Glynn:

okay. And then so, from your perspective, alistair, that that need to support a customer through that long period of time and, and what could be, whether that's through vulnerability, whether it's through their own personal circumstances, um have a more tailored approach. What? What impact is that having on your thinking as Aviva as well? This?

Alistair McQueen:

is the area that brings huge optimism and motivation and positivity for Aviva and, I think, hopefully for all of us in this market. While we might not know through the news what's going to happen from one day to the next, as mike's touched on, one thing that we do know is the geo. The demographic pressures are going to come down on the uk in the years to come. That is not unknown, that is pretty much known and we can all bring out statistics just to show the weight of that change. This week the government published the number of centenarians that are in the uk people aged 100 and above, and it's a little. I always find it interesting about 100 years ago that I think it was King George the fifth started sending telegrams to people on the hundredth birthday and a hundred years ago he sent 24 telegrams. 100 years ago.

Alistair McQueen:

This week the government announced there's give or take 15,000 people in this country aged 100 and above and that figure is only going to grow over the coming years and that brings huge celebration but it also brings great challenge to the country. It has to be paid for and the Office for Budget Responsibility themselves said if we as a society did nothing and just sat back and waited. That would bring huge pressures on the state. The figure that they put and I'll try and put this figure into some context they said if we did nothing, that would cost the state an extra 170 billion pounds every year to pay for our older population and that figure in context, that's more than we as a nation spend on defense, on policing, on housing, on transport, on agriculture and the environment combined every year. So so if we choose to do nothing, then this country has got great challenges in the years to come and therefore bringing it back to our market. What can this country do? Well, it could either tax people more to pay for our aging population doesn't want to do that it could accept that we and many people will be poorer in retirement. Neither of those are very attractive.

Alistair McQueen:

The third thing is the something else, and the something else is where our market must step in and step up the later life lending market.

Alistair McQueen:

That can be a hugely powerful something else.

Alistair McQueen:

Five trillion pounds worth of private wealth and housing, um, but yet only about one percent of that wealth has been accessed to support people in later life over the past 30 odd years. So it's those fundamentals that are the hugely empowering and motivating reason that this market is at the start of something which could be huge and that challenges us to look beyond the pressures that we've all seen over the past 18 months to two years and hold on to and keep the faith in those fundamental demographic pressures that are coming. And we, as a market, have an opportunity and indeed a responsibility to respond to those, to help the millions of people that are coming. And we, as a market, have an opportunity and indeed a responsibility to respond to those to help the millions of people that are going to be calling upon the types of services that we offer to help them achieve the lifestyle that they want and need in retirement. So demographics is a massive tailwind that can only mean growth for this market tailwind that can only mean growth for this market.

Paul Glynn:

Thanks, alice. I just want to touch for a minute then on on that. That picture painted of people living for a lot longer and that centenarian stat is is quite a right. A much bigger number than I. I thought it would be, um, but that creates a different challenge if people are living longer, as, as you touched on earlier, my um, you know that that planning cycle of I buy my first house, I pay it off. By the time I'm in my forties, I start to properly focus on accumulation, I get my watch on my gold clock at 65 and I start to take my pension.

Paul Glynn:

That we, you know we've said under the podcast right, and it's another format, that that's gone. It's a way way more complex picture and what Alistair's just outlined is a way longer picture than probably most people have any concept of planning for or the all the resources to plan for. Thinking that through, how can advisors navigate the growing complexity of those kind of client needs in later life with customized strategies that blend more than one product rather than a single point in time solution, which was the one I described earlier with that decision to buy a house, decision to pay it off. Decision to retire. So what does that mean in terms of client strategies? And then, what kind of a headache does that create for you as a product designer?

Mike Batty:

Yeah, it's incredibly challenging, isn't it? I think you kind of touched on it there. There is not going to be one product out there that's going to meet the needs of customers in this demographic. As we say, you've got the, you've got people coming into age 50 who are now very, very different people to those people maybe going to 70 and 80 now, and so it's you're not going to find a product that probably meets both of those needs. So it's again, what blender products?

Mike Batty:

And I think the main point here is that you need to start looking more holistically around what they have access to and what are the needs of that individual customer. Every individual customer is different. So the 70 or 80-year-old is going to want the certainty they're going to want to stay in their home for as long as possible, because that's what they're used to, that's what they've built up over this time. So, again, what products might suit them? Maybe a lifetime mortgage, a more standard product that has been the sort of bread and butter of this market, whereas the younger customer, who's a lot more used to debt, actually now what we're finding is that as people come into their 50s, whereas previously they might have wanted to pay off their mortgage by the time they were 50, I think a lot more people now, as they get to that age, are more comfortable holding debt a little bit longer.

Mike Batty:

So actually are there products that might suit them a little bit better, like sort of payment term mortgages that allow them to hold a mortgage that they're used to almost an interest-only mortgage, and then roll up into a lifetime mortgage at a later date of their choice. So again, I don't think there's a particular one answer to saying, well, what's the strategy here? I think the strategy is actually just considering all the options available to customers in retirement and then say, OK, based on what we know right now, what's the decision that we can make that suits your needs as a customer?

Paul Glynn:

Are those the same challenges that you're facing, Alistair?

Alistair McQueen:

Yeah, I think it takes a huge amount of time for cultural norms to shift. That's just human nature. It always intrigues me that when we ask clients, individuals, who do you turn to for financial help and guidance, the number one answer is always my family, and it's pretty much always my mum and dad and my previous generations. And the reality is that the experience that previous generations have had in navigating later life is hugely different to the one that today's generation and, more so, future generations, will experience. You know, previous generations may be one job for life. They were very fortunate to be underpinned by a defined benefit pension. They will have paid off their mortgage by the time they reach retirement and the retirement itself would have been, you know, a relatively short number of years. Nowadays, people might have a living job through their working life. They won't have a DB pension to underpin them. Majority won't. The majority of young people taking a mortgage today will not have paid off their mortgage by the time they reach retirement, and that retirement could be 20, if not 30, if not even 40 years.

Alistair McQueen:

So the challenge for us as an industry is not to look back to inform our future, future development, but to look to the future and see where this market and the needs of our clients will move, and build products that adapt to those very, very, very different and, as mike has touched on, much more complex and varied needs.

Alistair McQueen:

And the skilled operator in this market, be a manufacturer or an advisor, will be the ones that inform, uses that future reality to inform their plans. Today, if we use the rear view mirror, use that analogy to direct our development plans, we will be driving in the wrong direction, might even drive into a wall. It's not the rear view mirror that's going to guide where we need to take our products, it's the future, and that future is, as I've tried to suggest, to suggest, very, very, very different to the one that's gone there before. That mindset will take time to shift. Our clients will need help to understand that different future, um, and and that's a massive responsibility that we as an industry have got to to help clients understand that the different nature of the future and, fundamentally, the need to bring property wealth into the heart of that conversation as to how we're going to fund our hopefully longer, happier and healthier later life thanks, alistair.

Paul Glynn:

So another question for both you really around. You know we've seen um consumer now in in action in the market, which which creates some challenges and obligations for both advisor and provider alike. So what? What challenges do advisors face, or organizations like yours face, in navigating the evolving regulatory landscape, including the fca's consumer duty guidelines, and how can they ensure compliance whilst making sure you know there's an opportunity to to maximize client value?

Mike Batty:

yeah, I mean, um, the consumer duty community. I mean, one of the first things I have to say actually is incredibly supportive of what it's done. It's really started that conversation in a way that obviously, regulatory change always starts a conversation, but the conversation around consumer duty has been fantastic and it's really actually made people think a lot harder than they ever have done before about the customer outcomes, how our customers being impacted by the decisions we're making, by the products we're offering, and it's a really fantastic thing to see. And actually, you know, there's a few different strands there, one of which talks to what alistair said before around informing customers, advisors around the products. Actually, the review work that all firms have had to do over their literature and the understanding of that literature has been really brilliant. I know we've had to put all our documentation through various different cycles of testing and review to ensure that actually the people reading that documentation really understand it, and that's been incredibly powerful. We've had loads of people talking to us about saying, yeah, the way you've changed that it's never quite clicked in the way it has done now, which is fantastic. The evolution of that then is then actually watching people try and take that to the next step. So, whereas before you'd see, okay, I've sent someone a letter once a year and that explains their product happy days, actually, now the amount of tools available online in terms of videos, toolkits, whatever that might be has been absolutely brilliant.

Mike Batty:

I think, now more than ever, it is incredibly difficult for people to understand what their retirement might look like, but there's a lot of help out there to really help them on that journey, and that's been a really positive outcome to see. On the back of this, I think the other bit that has come out from community that's really positive is, again, people starting to consider alternative options for their retirement. You know, as I touched on it before, we said previously, people had a DB scheme, they take the pension happy days. It all worked out.

Mike Batty:

Um, there's been a bit of a gray area recently where it's been a lot harder for people to understand what their options are. Now, um, advisors, more so than ever before, are saying okay, what are the options available to you? What type of mortgage do you need? What savings do you have? Can you take an annuity? What combination of these products suits your needs as a customer, as an individual? Which is really fantastic to see, and I think that's that's always happened to to to a good extent before, but now more than ever it feels really powerful, so really positive step forward, steps forward under consumer duty. I'm really, really happy to see it?

Paul Glynn:

And Alistair, are you seeing that kind of similar? You know, drive for better customer education at the end of the process and understanding, and my take on what Mike's just said is there's a massive opportunity to use your phrase earlier, Alistair for collaboration or expansion for businesses where they can work with other practitioners, where they've identified that specialist need in that more complex retirement plan, or they can expand themselves. So, are you seeing similar things?

Alistair McQueen:

Yeah, I mean, I think when a regulator announces it's going to introduce something new, I don't think there's many who stand up and say, brilliant, delighted, we want to do this, do all this. But it's very hard for any of us on our provider advisor side of the market to say that driving good outcomes is a bad thing. And that's fundamentally what the consumer duty is all about, and therefore I echo the words that mike said is that we do see as a very positive force for good. It raises the bar. Um, I'm guessing that on many of our collective websites we always say we put the customer at the heart of all we do. The consumer duty is the FCA standing up saying all right, prove it then. And I think that's a very positive and healthy challenge and I think all of us are rising to that, hopefully rising to that challenge, and that can only be a good thing for customers, building trust. If we can build trust in the mind of the customers, that's a good thing for our business and our long-term prospects.

Alistair McQueen:

I think there are also elements within the consumer duty that can be really powerful and positive for the later life lending market. The consumer duty challenges all actors to avoid foreseeable harms, challenges all actors to pursue, help clients pursue their financial objectives. And those two challenges within the consumer duty force, I think, all of us to look beyond our silos of the market in which we operate, whether it's the residential mortgage market, whether it's the later life lending market, whether it's the wider wealth market and all that the people in that market do. We need to look at our propositions and our products and our services through the eyes of the customer and they don't think in a siloed way. They just think I've got financial needs, I've got ambitions, I've got aspirations, I've got concerns, help me.

Alistair McQueen:

And I think the consumer duty is a positive force that forces us all to look beyond our silos, to try and work with our partners, be that in the residential mortgage market or be that across in the wealth management market, and say look, clients don't look at us as, in that case, three.

Alistair McQueen:

They look at us as one homogenous unit. We need to work together and the more that we can work together across different silos that there are currently in this market, the better place we will be to serve those that we need and, as I said before, the better place will be to bring the five trillion pounds worth of wealth, of property wealth that there is in society, to closer to the heart of good financial planning conversations, and that that must be good for the client and it must be good for our market, not in a machiavellian way but just for the objective of delivering good outcomes. So so I challenge us all to see the consumer duty as a force for good, yes, driving good outcomes for those we serve, but also good for the ongoing maturity of the later life lending market thanks, alistair.

Paul Glynn:

I'm going to put you both on the spot for a minute with the next couple of questions um so, just just with that evolution that consumer duty is driving and with that complex backdrop, how do you both see, you know the the next phase of that evolution unfolding where you know we've we've seen consumer duty in the market for a while now? You've quite rightly both outlined the impact and the effort that's gone in a lender level to support documentation to make sure the products are aimed and are delivering results to the right type of customers, and advisors are doing the same thing in terms of documenting their own process and the value that sits around it. How do you see that driving the the next evolution of change in the market?

Mike Batty:

so I think it's really. It's really interesting. That isn't it? Because I think for a lot of firms, there was a deadline in the middle of this year that they had to meet to embed various elements of consumer duty, and that the next iteration is is actually going to be building on everything we've learned.

Mike Batty:

I think one of the points that Alistair made which really resonates with me is that prove it bit, and it's been really fantastic to see all the firms across the market start to look at actually how can I prove this, what the outcome? That, I believe, is there. But what's probably more interesting for me is that, as firms have gone through that journey to try and prove their theories, they've learned an incredible amount about what their customers are actually doing that maybe they probably didn't know before, and so the next phase of this is hopefully building on those learnings. I expect to see more innovation, more change in the market, more more improvements in order to meet customer needs that we probably haven't seen before. So, uh, yeah, really looking forward seeing more of that going forward and then just embedding that on an ongoing basis. You know this can't be something that is is completed this year and then we've we've done it. Now it's really continuing it, going forward, re-ingraining all of our businesses so that actually we continue these positive benefits that we've been seeing alistair.

Alistair McQueen:

You've seen the same yeah and I'm really glad, paul, that you used the word evolution, not revolution. I think there is an evolution that we're going to see and that's we must accept, driven by the mindsets of those who were ultimately here to serve and that evolution, I think the foundation of that evolution will be continued education of the client base about what this market can offer and how it's more relevant than ever to the realities of today's financial needs, not the financial needs that our parents or maybe our grandparents had before us. Education Trust needs to continually be invested in and built. There is still some stigma around this market and stigma around the idea of debt in later life, and I wouldn't just. We're very good in this market of beating ourselves up on the trust issue.

Alistair McQueen:

Trust is an issue across society in the UK at large. Every year there's a survey that comes out by an organisation called Edelman Edelman's Trust Barometer. They look at the top 30 countries around the world and see where are the levels of trust. The UK is at the bottom of that trust metric. Trust is very fragile in the UK, be that in the eyes of business or in the government or in media. So it's not just in our market.

Alistair McQueen:

We need to build trust, transparency is needed from us and reassurance. So I would, rather than us rushing to say we need to build this bell or this whistle or this twist or this turn in the proposition in the spirit of, as you said, paul, evolution. Those fundamentals of education, trust, transparency, reassurance are the foundations upon which our market will grow to serve the needs of our customers. We mustn't get too far ahead of ourselves and certainly too far ahead of those that we're serving. We must work with them at the pace that they're ready to work with. But I'm genuinely in the belief that the fundamentals are there. The consumer duty will be a force for good in driving that forward. And if we continually as we're doing now, doing now, powered by the consumer duty listen to the customer, then the opportunities remain significant.

Paul Glynn:

Thank you both. Final hotspot question from me me, then, and I've saved the interest rate one till last. Um, so I appreciate that neither of you or your organizations have a magic crystal ball. If you did, you wouldn't be on this podcast and I'd be wherever you were on a desert island, um, reaping the rewards of that alongside you. But with interest rates fluctuating, how should advisors approach, advising clients on longer term lending products and lifetime mortgages or retirement interest only mortgages, when none of us have a crystal ball? It wasn't that long ago that interest rates were quite a bit lower. Mike, you even use the term new norm. So, from both of you, what's your take on? Is it a new norm? What's the short and medium term outlook for interest rates, particularly as we record this just after an election and on the verge of an important budget? Um advisors are interested in, I'm sure, what both of you have got to say on the the short and the medium term expectation for interest rates when you're planning around those types of products. Mike, can I come to you first?

Mike Batty:

yeah, um, that is the tricky one, as you say. I would very happily give a really good answer on this one. I think I touched on it earlier. I think the likelihood of rates dropping all the way down to where they were three years ago pre the 2022 mini budget, it's very unlikely at this point.

Mike Batty:

I think all I can say for advisors is to think about where are we now and what's the need of the customer in front of me. Almost the rate, in a way, should be almost a secondary point. There they should be thinking about okay, does this customer have a house they want to stay in for their life? Does this customer need to adapt to that house? Do they have care needs there? And when they then say, right, this is the customer's need I've got in front of me, they then need to consider what are the options to support that customer, one of which might be a lifetime mortgage or a mortgage of some variety based on rates, but there are other options out there they need to consider as well, and they need to consider all those options.

Mike Batty:

What I wouldn't be saying is almost wait for some magical drop in interest rates that we think is going to happen at some point in time. I don't necessarily think that's going to happen. I can't say that for sure. And you just watch. Now a budget come out and change a lot, and this time about will come back to bite me, um, but yeah, I think it's almost. Consider what the customer, what you know today. So consider the customer you've got in front of you where rates are. Does that product or solution meet their needs? And that's what should be considered, rather than trying to worry too much about what the underlying rates are going to do and what might happen in the future, because I think you can get caught up quite a lot in that.

Paul Glynn:

It's quite challenging for you yeah, and it does narrow down what the advisor really needs to focus on, and that's what they're great at. Alistair, have you got a similar view or a different view?

Alistair McQueen:

yeah, I mean I, I wouldn't use this. I wouldn't describe today's world as the new norm. I would actually describe it as the old norm. The experience that many of us we all lived through in the past decade of the 2010s, of interest rates at the level at which they were, was hugely abnormal. Been around for over 300 years, until the global financial crisis of 2008,. Base rate had never been below 2% never and yet we had a decade of it bouncing around zero. That was abnormal. So I think we're back to an old norm. Base rate is now, as we speak, at 5%.

Alistair McQueen:

Aviva's got a vision of base rates. We're seeing it in the three to four percent over the the medium term, not not anywhere near back to where it was. That. That is the old norm that we see and that's the market in which we see ourselves operating and the way we see ourselves planning. I think what, while we might not see rates we won't see, don't think rates go back to where they were during the 2010s.

Alistair McQueen:

I think what we can hope for is some more stability around interest rate movements. We saw something like 12 or 13 consecutive decisions by the Bank of England to increase the base rate up towards 5.25%. That had never been seen in the history of the Bank of England. These are very unusual times that we've been through. So, while I'm not going to sit here and say we're going to go back, I'm going to say we won't go back to the 2010 levels.

Alistair McQueen:

I'm hoping we can get to a position where we're not seeing huge volatility in the base rate that undermines the confidence of those that we're trying to serve. If people think, geez, the interest rate is going to move next month and the month after that and the month after that, it's hugely difficult for them to make big decisions. It's hugely difficult for advisors to give good recommendation and build confidence. So I think we we can hopefully see all else being equal, hopefully see some stabilization in interest rates to allow people to make more stable and considered conversations and and build those conversations around those old norms, um, and use that foundation of a little bit more certainty to build a little bit more confidence and continue to see the the regrouping and the regrowing of this market that we've just seen over the past three to six months.

Paul Glynn:

That's a helpful steer from both of you. So, from an air perspective, we have lots of members who day-to-day do a great job in digging into the personal circumstances of customers, personalizing an approach, and what we've touched on in this podcast is, you know, those solutions are becoming ever more complex. They're becoming supported by your product designs ever more innovative, and it's that element that the advisors should spend the time and focus on addressing. You know what the customer needs are, what the product type is and solutions that are out there and then making that decision in the context of this new stroke, old norm that you've both given us some clear steers on. So thank you both for that. It's been very helpful. You'd be pleased to know I'm not going to quiz you anymore. I think this has been a great session.

Paul Glynn:

My takeaways, as we've moved through the the different parts of the conversation, have been you know, we have a an aging population, um, backed by some great centenarian stats. We've got lots of different product designs out there, from, you know, payment to mortgages, to personalized products that have got health in them, from both of your organizations. Consumer duty has been a really positive force for good over the last 12 to 18 months and we should embrace that. But embrace it in what I heard from both of you is go beyond silos whether that's mortgage versus equity release or, more importantly, whether it's mortgages versus the wider product and wealth management solutions that are out there to get to a truly personalized decumulation plan with an advisor right at the heart of it, backed by some brilliant product designs. So all of that, if we get it right, is an opportunity for growth. It's definitely an opportunity for building education for customers in a complex environment over a longer period. So it's a great way for advisors to build a rapport with customers over time and demonstrate their expertise or build expertise with like-minded partner businesses. But over and above that, that creates trust over time, which again is a great platform for growth.

Paul Glynn:

So thank you both for your time today. I've really enjoyed the conversation and hopefully we'll speak to you soon on future podcasts. Thank you both and hopefully we'll speak to you soon on future podcasts. Thank you both. Thanks for listening to the Master Later Life Lending Podcast. If you've enjoyed our comprehensive conversations, please take a moment to rate and review us on your favorite podcast platform. Your support helps others discover the show. Don't forget to subscribe so you never miss an episode and follow us on social media for exclusive content. Join us next time for another comprehensive conversation.