Published: 22 November 2016 | Author: Kasar Ayub, quality assurance test analyst, The Northview Group
Kasar Ayub, of the Northview Group, emerged the winner in the third “rising stars” challenge at this year’s CML conference. He won with his proposal for a mortgage that would allow older people to downsize without moving home – while also creating new accommodation for other households.
Kasar, a quality assurance test analyst, was one in four finalists who presented their proposals at this year’s conference. His mortgage product, called Let to Live, was voted the winner by a panel of judges and the delegate audience at the conference.
The standard of entries was again high this year, with Kasar winning against strong competition from Ben Deeley, a senior business auditor from YBS Group; Claire Hodson, channel planning and reporting manager from Lloyds Banking Group; and John Houlton, product design manager with the Royal Bank of Scotland.
After presenting their proposals, the finalists were questioned by members of the audience and a judges' panel comprising independent mortgage expert Jackie Bennett; product director Chris Buchanan, of Legal & General Home Finance; David Humphrey, former “rising stars” winner and mortgage and protection adviser for Mortgages First; and Tracie Pearce, head of mortgages at HSBC.
Kasar’s proposal was for a Let to Live mortgage that would enable older people to downsize to a smaller apartment in their current home. Converting the existing family home would create extra acommodation that could be let by a local authority, housing association or charity. Let to Live would enable older people to downsize in surroundings they are familiar with, while taking a lump sum and living rent free until they move into other accommodation or pass away.
In today’s article in CML News & Views, we give Kasar the opportunity to explain in his own words exactly how Let to Live would work:
The United Kingdom is an ageing country. People are living longer and this is placing an increased strain on the country’s already limited housing stock. Figures published by the House of Commons library in 2015 estimated that the number of people aged over 65 would rise by 12% in the next five years, versus overall population growth of 3%.
The number of people aged over 85 will increase by 18% to 300,000, and this poses a number of questions for the UK’s policymakers and housing sector. As people get older, they encounter issues such as decreased mobility and this can often leave them in unsuitable accommodation, which they are unable to adapt.
A report by the International Longevity Centre - UK found that almost a third (32.6%) of home-owners aged over 55 were considering or expecting to downsize. This is often from the former family home, which may be too big for their needs or unmanageable in other ways. More than half (56%) of respondents to this survey said that lower maintenance costs were the main reason for wanting to downsize.
However, a move into specialist accommodation can leave older people in a property located in an unfamiliar area or further away from their support network.
There is a solution to this problem. A Let to Live range of mortgage products could help support older home-owners and increase the level of housing stock available to local authorities, housing associations and charities.
Two for one
The Let to Live proposal would see mortgage lenders working alongside these three housing stakeholders to buy the property and convert it into a number of units, with the home-owner living in one of the flats (likely to be on the ground floor ), which would be converted to their changing needs.
All of the newly created flats would be managed and maintained by a housing partner on behalf of the lender and they would be able to let the other units to key workers or tenants on the local authority waiting list.
The home-owner would receive a cash lump sum from the lender and be allowed to live in their new flat, rent free until they move to other accommodation or pass away. The cash sum they receive would be based on:
- the open market value of the property;
- the age or life expectancy of the owner;
- the cost of converting the property; and
- estimated rental income from the other units.
This allows the vendor to be able to live in their existing house, close to family and friends, and pays for any changes required. When the vendor passes away, the lender could rent out this flat through its housing partner.
This approach can be much more cost-efficient and less stressful than a traditional downsize. A report by the Pensions Policy Institute said that the costs of downsizing can be enough to make such a move uneconomical. It estimated that a downsize from a property worth £350,000 to one worth £230,000 could cost more than £13,000 when taxes, survey and legal fees are taken into account, more than 10% of the equity released.
Simplified planning permission
Sub-division of the property is likely to require planning permission from the local authority and this process can take time. However, some rules could be relaxed to assist the conversion process. A precedent has already been set when the government temporarily relaxed planning regulations to allow developers to convert office and commercial buildings into residential use.
A suitable government exemption could be created in partnership with mortgage lenders and housing associations to ensure properties were only converted for this purpose.
A unique solution
With key stakeholders operating in tandem, such as lenders, government agencies, housing associations, housing charities and local authorities, the Let to Live mortgage could prove to be a valuable addition to hard pressed home-owners who want to stay put, but want to live in more appropriate accommodation for the rest of their days, not worry about rent or mortgage costs, and leave an inheritance for their family. The Let to Live mortgage would also crucially free up valuable accommodation for hard-pressed tenants to rent an affordable home.
While the Let to Live mortgage would not be suitable in all cases, it would allow some home-owners to take advantage of this scheme and ease the UK housing crisis, which is getting worse as we fail to build the number of new homes we need.
New ideas such as Let to Live are vital if we are to make the most of our current housing stock while also allowing older people to remain in the accommodation where they feel most comfortable.