You are here: Home - News -

More to equity release growth than record low rates – analysis

by:
  • 19/04/2017
  • 0
More to equity release growth than record low rates – analysis
Interest rates on equity release deals have fallen to new record lows, but is not a big contributor to the growth of the sector, it has been suggested.

Equity release has seen huge growth in recent years. According to figures from the Equity Release Council the value of lending in the five years from 2011 onwards has almost tripled, passing the £2bn mark last year.

And new figures from Moneyfacts have highlighted how rates have fallen, while product choice has increased. It revealed that the average lifetime fixed rate had dropped from 5.91% in April 2015 to 5.63% today, a new record low, while the number of lifetime deals had jumped from 52 to 82 in the same period, also a record.

Rate isn’t a major factor

Whether falling rates have contributed in any great way to the increasing use of equity release is open to question though.

Andrea Rozario, chief corporate officer at Bower Retirement, said that falling interest rates had definitely helped, noting that the sector had come in for a lot of criticism over the years because of the cost of deals.

She added: “As rates have come down, and we have seen more competition, the more accessible equity release has become for customers. It is great for us as an industry to see moves that mitigate any negative reception.”

Dean Mirfin, technical director at Key Retirement, pointed out that the regulator demands that equity release is not sold on rate – it’s a question of establishing exactly what the borrower needs, and then finding the right product to meet those needs.

He added that the market had benefitted enormously from added competition, not simply because that had pushed rates down but because it had also resulted in innovative product design.

Mirfin continued: “Downsizing protection is one added feature that has become more popular in the last year or so; after you have had the loan for at least five years, all early repayment charges are waived. That gives massive peace of mind to people, knowing they won’t get hit with a big penalty if they choose to move to a retirement property which they couldn’t port the loan onto.”

Last month Mortgage Solutions revealed that another new lender, Responsible Lending, plans to formally launch into the market later this year.

Referral partnerships

As equity release has become more popular, a number of mainstream intermediaries have announced partnerships with equity release specialists. For example earlier this month TenetLime announced its members would be able to refer clients on to receive equity release advice from Age Partnership, pointing to the increased demand it had seen from its clients.

Mirfin noted that a “sizeable percentage” of Key’s business is referred from other mainstream brokers rather than being generated directly.

He said: “A lot of these advisers have the permissions to do it, but because they don’t see the volume, they feel happier referring it on. They aren’t turning clients away because they feel their knowledge isn’t up to speed, and they get to share in the revenue too. It’s a relatively painless process.”

Rozario added: “Fostering a relationship with a company that specialises in equity release is something we encourage, and it is on the increase. It’s not enough to just get your equity release advice qualifications – it’s a different customer service process, and a lot of advisers are beginning to recognise their clients will benefit from advice from a specialist.”

Interest-only

The prospect of a large swathe of interest-only mortgages reaching maturity in the next couple of years is also seen as a further boost for the equity release industry, with equity release seen as a ‘lifeline’ to borrowers with few repayment options.

Mirfin said that equity release will be an option for some facing questions over how to pay off their interest-only mortgages, but emphasised that it needs to be considered alongside all other options too.

He said: “You have to go through the process, see if they qualify for a normal mortgage or whether they would be better off downsizing, as well as equity release. It’s not that equity release should be considered the last resort, but you simply have to weigh it up against the other options you may have.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
2173729-stop-sign-isolated
Atom Bank pulls five-year 1.29% fixed rate mortgage

Atom Bank is pulling its five-year fixed rate mortgage priced at 1.29%, just seven days after launching the promotion.  

Close