LV= new business protection sales come to £356m in 2023

LV= new business protection sales come to £356m in 2023

According to its latest financial report, overall new business sales, which are on a present value of new business premiums basis, came to £1.2bn, a 21 per increase on the prior year. This includes £831m of savings and retirement, which is a 24 per cent fall on 2022 figures.

LV= said that it arranged equity release mortgage advances of £40m, which is a decrease from £242m in 2022. The company said that equity release products were “not actively marketed for much of the year”.

The report said that its protection business reported a trading profit of £30m, which is a 50 per cent increase on the prior year figures.

The firm reported an overall profit before tax of £107m, which compares to a £145m loss before tax in 2022.

David Hynam, LV=’s chief executive, said that its “robust business model and focused strategy” meant LV= had been profitable despite “many external headwinds, including high inflation, rising interest rates and low growth”.

He noted that its performance had allowed it to return £30m to eligible members in the form of member bonuses.

Hynam said that the “outlook for LV= remains positive, and the business’ foundations are strong”.

“We have continued to evolve and develop the business in line with our strengths and core values, and I am pleased to say that our diversified business model meant we outperformed in sales across our protection products and annuities,” he added.

Hynam said that it had expanded its equity release offering with a new range backed by Scottish Widows, and it had also kept overall operating costs flat “despite an external environment of significant inflation”.

He continued: “Sustainability has been at the forefront of our work. In addition to our operations being carbon-negative since 2022, we’re committed to driving forward our sustainability strategy. This includes our transition to an exciting new primary asset manager, BlackRock, a market leader in sustainability and the largest asset manager in the world, with unparalleled investment capabilities.

“My focus going forward is to drive LV=’s performance and delivery as a high-performing, best-in-class mutual that gives great returns to members alongside striving for excellent customer service.

“As a result of our focused business strategy, we have returned a profit this year. LV= members can be confident that we are driving progress and our foundations remain strong.”

Last year, the company released a new range of equity release products.

Closed book deadline will be a ‘game-changer’, says Consumer Duty Alliance head

Closed book deadline will be a ‘game-changer’, says Consumer Duty Alliance head

Speaking at an Air round table about comprehensive advice conversations in the later life sector, Richards said the Consumer Duty regulation presented an opportunity to “create an environment with greater trust”. 

He said this was one of the key objectives behind the rules. 

Richards added that the closed book deadline of 31 July would be a “game-changer” that would impact distributors as well as manufacturers, as they would have to start thinking differently about their legacy back books. 

The panel was asked if this could result in lenders updating product expiry communications to inform borrowers of options they did not offer, such as a lifetime mortgage or newer equity release product features. 

Richards said banks would be under pressure where they had “relied on customers’ lack of understanding or awareness of new products, better rates or terms”.

He added: “It’s now going to be on them to make those customers aware of those terms. Otherwise [banks are] knowingly disadvantaging [borrowers].” 

 

Reconsideration for SVRs

Will Hale, CEO of Key, said one area of lending that had not got as much attention as it should have was the standard variable rates (SVRs) offered by mainstream mortgage providers. 

He said this represented a great opportunity for intermediaries. 

“When you look at mainstream mortgage rates on two- or five-year fixed deals, they do look relatively competitive compared to lifetime mortgages. When you look at SVRs, they don’t look out of line, and many lifetime mortgage rates are far lower. 

“All of those older customers who are stuck on SVRs with mainstream lenders should be encouraged to shop around and see what other options are available for them. I’m sure intermediaries will be happy to have those conversations to try and find them better solutions.” 

Hale said the banks did not want to give these customers up for obvious reasons, but this was what Consumer Duty was trying to address. 

Ben Waugh, managing director of More2life, said: “We are doing and have already done a lot of work on the back book reviews under Consumer Duty for the closed book. It’s been a really good, interesting exercise to look at loans that we might have originated 10 or 11 years ago and compare them to the modern features that you’d expect on a product today. 

“We are making changes to the terms and conditions we’re applying to some of those old products to better ensure that the likely current needs of those customers are able to be served.” 

“I would say, we are doing exactly what the FCA [Financial Conduct Authority] hoped we would do which is… don’t just forget about them because there are customers at the end of that. We need to change and adapt, we will do, and that is exactly what we are doing,” Waugh added. 

More2life announced this week that it would stop distributing through firms that do not comply with Consumer Duty.

More2life willing to stop distributing through firms not complying with Consumer Duty

More2life willing to stop distributing through firms not complying with Consumer Duty

Speaking at a roundtable event hosted by Air on the theme of comprehensive conversations in the later life lending sector, representatives were asked how much work needed to be done before holistic advice was a standard. 

Will Hale, group director of Key Group, said: “The aspiration we should have as an industry is a customer should be able to come into an advice process from any part of the market, mainstream mortgage adviser, later life specialist, financial adviser and get the right outcome for their individual circumstances, irrespective of scope of service or the product range that an individual firm offers. 

“How far do I think we are away from that? In all honesty, quite some distance. But the steps I’m seeing in the market at the moment are showing quick progression towards that aspiration.” 

He said reaching this stage was a “tough journey” and the sector was not there currently, but advisers should be aware that there was a need for change. 

However, Hale predicted that in a year’s time, “meaningful progress” should have been made. 

 

The role of technology

It was also asked what aspect of the process or adviser education would encourage this change the most effectively or the fastest. 

Paul Glynn, CEO of Air, said the integrations being made with the group’s technology across the sector would “help to accelerate a better advice journey for our customers”. 

Keith Richards, CEO of Consumer Duty Alliance, said there was a reason the Financial Conduct Authority (FCA) was one of the first regulators to launch a technology sandbox, indicating technology would play a “massive role” in supporting a holistic advice process. 

Ben Waugh, managing director of More2life, said there was a clear appetite for education and understanding of how the later life market was changing, based on the attendance and engagement of the lender’s webinars and events. 

As for those who do not catch up with changes, Waugh added: “We will simply not give product to certain distribution channels unless we are confident that the product is properly understood… which is under Consumer Duty, a big change but one I think will help incentivise firms to make sure they are absolutely on their A game and doing the right thing for customers.

“Otherwise, we will step in as a lender and say ‘sorry, you don’t get the product’.” 

Earlier this week, it was reported that over £2trn was on the table to buy lender back books ahead of the Consumer Duty deadline.

Royal London launches lifetime mortgages through Air Sourcing

Royal London launches lifetime mortgages through Air Sourcing

The product from Royal London is available to all third-party advisers who are members of Air Sourcing. 

The Principal and Efficiency Plus products both have 10-year early repayment charges (ERCs), and partial repayments can be made up to 10 per cent of the total cash advance each year. 

On the Efficiency Plus product, homeowners with a property that has an EPC rating of between A and D can access a reduced interest rate. 

The products are open to homeowners aged from 55 up to the day before their 90th birthday, and the minimum property value allowed is £125,000, while the maximum is £2m. 

Borrowers can also access in-house referrals, which the company said would enable flexible underwriting on either product. 

These are the first two products launched by Responsible Lending since its parent company Responsible Group was acquired by Royal London earlier this year. 

Chris Flowers (pictured), intermediary sales director at Responsible Lending, said: “We are delighted to have partnered exclusively with Air Sourcing to roll out the Principal and Efficiency Plus products to the wider broker community and their customers. 

“Expanding the Royal London range will ensure advisers have access to a diverse array of products, enabling them to tailor solutions more precisely to meet the unique needs of their clients.

“Equity release remains an important later life finance option, and we are confident these products will meet the needs of homeowners across the UK, providing greater flexibility when unlocking their property wealth.” 

Mike Taylor, managing director at Air Sourcing, added: “We’re thrilled to be working exclusively with Responsible Lending to launch two new Royal London Equity Release products to Air Sourcing members, and to bring a wider offering to customers. 

“It is more important than ever that advisers have access to the right products suitable for individual needs and lifestyles, to achieve even greater success in delivering exceptional outcomes for their clients.” 

There is no need to lose faith in later life lending – Wilson

There is no need to lose faith in later life lending – Wilson

Early reaction from some quarters has described these latest figures as ‘worrying’, although my view is that they have to be reviewed within a much wider economic context, not least the environment that older borrowers – and indeed all consumers – have been facing in the last 12-18 months.

But, are the figures ‘worrying’? Should all of us sector stakeholders be ‘worried’?

 

Putting it into context 

It may well depend on how you see the later life lending market. Do you see it purely as ‘lifetime mortgages’, which these UK Finance figures refer to? Or do you see it in the context of a much wider marketplace? 

If it’s just the former, then you may well be ‘worried’ by the drop in lending between 2022 and 2023, however I might also suggest that you have probably not been in and around the market for very long. 

Anyone who has spent multiple years active in equity release, for instance, will know full well that there were many, many years when the sector could only dream of £4.1bn of lifetime mortgage lending in a calendar year – the figure for 2023, according to UK Finance. 

They will remember years when £1bn of lending looked like the very height of ambition for the sector during 12 months of activity, let alone an average of this over a quarter. 

And yes, of course, we’re acutely aware that the lifetime mortgage business saw a fairly substantial drop-off between 2022 and 2023. However, name me any specific mortgage sector that didn’t see a similar fall in activity, be that buy-to-let (BTL) or other types of specialist lending, not forgetting residential purchase and remortgaging. 

 

An unsurprising contraction 

When you have a significant increase in rates over the course of any period, it is inevitable you will have a tail-off in both demand and activity.

The increased cost of that lending will weigh heavily on a large number of potential borrowers, and they may not be in a position to either afford the loan, or they might simply decide now is not the time to be doing this. 

The point we should all be focused on, of course, is whether the 2023 environment is likely to prevail, and will last year be the norm for years to come? I think we are already seeing signs that this is not going to be the case, particularly if inflation continues to track downwards, if it moves towards, and eventually reaches, the Bank of England’s two per cent target, and if rates can be moved further southwards as a result. 

We’ve seen already this year how lower rates have shifted the market, and later life lending is really no different to the wider mainstream space. Not least because it’s much more of a mainstream offering anyway, with many older borrowers taking out mainstream mortgages, plus of course you have retirement interest-only (RIO) options, plus all those available within the lifetime mortgage sector. 

 

Led by rates 

Rates clearly have an impact – that is a fact we can’t deny – and 2023 felt that more keenly than in the years prior to that when we were fortunate to have ultra-low rates. They, of course, impact loan-to-value (LTV) levels as well – a major consideration for later life lending – and this clearly adds up to the levels of business and lending we saw last year. 

However, as we all-too-readily know, the market can shift (and to some extent, has).

It’s not a linear shift – it never really is – and we will see pricing move up and down, reflecting a whole host of concerns and issues at any one time. However, it’s likely that we will see bank base rate cuts this year, and we already have swaps responding to this greater likelihood, which does mean that average rates have tracked down from the norm last year. 

These are still very early days in 2024, but we should not be worried by the figures as recently revealed. The underlying fundamentals of the later life lending market are strong, as are the greater array of options available to advisers and their later life borrowers.

The important point is to be active in this space, ensure clients are aware of your advice offering, and ensure you are able to cover off all of the growing number of options that are available to you and them.

No worries.

Moneysupermarket agrees exclusive referrals with Equity Release Group

Moneysupermarket agrees exclusive referrals with Equity Release Group

Moneysupermarket will integrate ERG’s SmartER product comparison technology into its platform so people can research products before seeking advice. 

 

Change the equity release experience 

The ERG said this now positioned its technology arm Equitec as a unique offering to borrowers aged 50 and over. 

Mark Gregory, founder and CEO at ERG said: “Partnering with Moneysupermarket brings about valuable change and is set to enhance the whole equity release customer experience.   

“This has always been our goal and with the implementation of SmartER, which is swiftly becoming the key point of entry to market, consumer choice, independence and transparency has now been made more widely available.” 

He added: “We understand the value this holds with consumers, given that there has been a sharp rise in the amount of people now using online tools for research purposes.  

“Given the breadth and depth of Moneysupermarket’s customer base, we foresee that this partnership will support growth within the market.”  

Ashton Berkhauer, general manager from Moneysupermarket, added: “We know more and more homeowners are looking to release equity to support their choices in later life. Our partnership with ERG allows homeowners to compare the equity release market and see the options that match their specific requirements.” 

 

Identifying benefits

Jim Boyd, CEO of the Equity Release Council, said there needed to be more recognition of the benefits of equity release. 

He added: “One of the biggest challenges facing the equity release industry is how to ensure that property is included when wider retirement conversations are taking place. To get a seat at the table, we need to continue to push for more recognition of the benefits of these products and make it easier for people to explore all their options.   

“We therefore welcome the partnership between ERG and Moneysupermarket as it will help more people to have these vital discussions around property wealth during their retirement planning.” 

ERG’s SmartER technology is available to advice firms and this can be integrated into an adviser’s website. 

Gregory added: “Our suite of products form part of the one-system approach to our technology, completely aligned to Consumer Duty, going beyond the required guidance to form an industry-leading client and adviser journey.” 

A fifth of people do not expect to retire mortgage-free – ERC

A fifth of people do not expect to retire mortgage-free – ERC

A survey of 5,000 people conducted by the Equity Release Council (ERC) and Canada Life found that the 22 per cent who said current mortgage payments stopped them from saving towards retirement was higher than the 14 per cent who said the same in 2021. 

Some 19 per cent of respondents did not know if they would be mortgage-free by the time they retired. 

Nearly one in six – 16 per cent – said their mortgage debt was stopping them from retiring altogether, which was higher than the 14 per cent who said the same in 2021. A tenth said they could not reduce their hours at work because of their mortgage payments, a greater share than the four per cent impacted in 2021. 

As for their current lifestyle, 21 per cent said mortgage payments were stopping them from affording a comfortable lifestyle, up from 13 per cent in 2021. 

Respondents suggested this was affecting their wellbeing, as 13 per cent said mortgage worries kept them up at night, 11 per cent were prevented from moving home and seven per cent had to stop other family plans. 

 

Accessing property wealth 

The majority – 90 per cent – of respondents said it was important to be mortgage-free in retirement. 

The study found that it was less important to younger homeowners to be mortgage-free by the time they retired.

Despite its importance, just two-thirds of all respondents believe their mortgage will be cleared by this point, and this figure fell to 60 per cent among those aged 55 and over.

To support their lifestyles, respondents suggested they would rely on property wealth and later life mortgages. 

Some 31 per cent said accessing property wealth later in life would improve their finances and retirement income, up from the 25 per cent who believed the same in 2021. 

Just over a quarter – 26 per cent – said a later life mortgage would boost their income, which was higher than the 21 per cent who had the same view in 2021. 

 

Juggling retirement savings and mortgage bills 

Jim Boyd, CEO of the ERC, said higher interest rates pushing mortgage payments up was “making it difficult for homeowners to prioritise retirement savings alongside their mortgage and wider bills”. 

He added: “While this might be something they can just about manage in the short term, the real concern of this spike in mortgage costs is the strain it puts on people’s long-term financial resilience. It’s truly alarming that mortgage debt has become so uncomfortable that people are having to put off starting a family, ending a relationship, or changing career. Having to push back key milestones and life moments like this is not only disheartening, but could ultimately be detrimental to society as a whole.

“Rather than struggle against the tide, we need to recognise we are in a new era where the goal of becoming mortgage-free will, for some people, be less important than the practical need to access property wealth in later life. With approximately £2.63trn of net housing wealth in homes owned by people aged 65 or over, there are clear signs that a shift in the national conscience is underway and property wealth is stepping into the spotlight for retirement planning conversations.”

Tom Evans, managing director of retirement at Canada Life, added: “Retirement feels like a distant dream for many, and having worked hard throughout life, it’s logical to hope or even expect to be mortgage-free when reaching this milestone. As the past few years have shown us, though, unexpected changes can happen, with plans getting turned on their head. As such, many of us will face the possibility of having to adjust our ways of living in retirement.

“Whilst this may feel unsettling, it’s important to remember that there are always options. Lifetime mortgages now offer greater flexibility to individual needs, and so more people may consider the prospect of using property wealth alongside other assets to fund retirement. Our customer data show that paying off an existing mortgage has been the top reason for releasing equity for the past six years, but this is just one of many drivers for customers releasing value from their homes. 

Spry Finance joins Equity Release Council

Spry Finance joins Equity Release Council

The firm is part of the Irish-owned Seniors Money Group, which had more than 15 years of experience offering lifetime loans to over 30,000 customers across the globe. This includes Ireland, Spain, Australia and New Zealand.

By joining the ERC, Spry Finance commits to consumer protections and customer service by adhering to the trade body standards.

The Equity Release Council now has 759 member firms and 1,800 individuals registered.

Jim Boyd, CEO of the ERC, said: “We welcome Spry Finance’s decision to join the ERC, whose standards underpin the UK market, which is considered to be the most sophisticated internationally.

“All advanced major economies are facing the same challenges from a rapidly ageing population and inadequate retirement savings. We are committed to working with Spry and our wider membership to ensure equity release products are safe, flexible and reliable at a time when they are an increasingly important feature of every adviser’s financial planning toolkit.”

John Moriarty, CEO of Spry Finance, said: “As the sole provider of equity release products in the Irish market, we are well aware of both the opportunity for growth and the importance of ensuring good outcomes for every customer.

“Membership of the Council will allow us access learnings and experience that will be helpful to us as we continue to develop and implement our strategies for product development, for marketing and communication and for industry-leading customer service and management.”

The ERC recently added Countrywide Surveying Services (CSS) as an associate member.

Scottish people most comfortable releasing equity to help family

Scottish people most comfortable releasing equity to help family

According to research from Hodge, which gathered views from 1,240 people between 16 and 80-plus, 84 per cent aged under 50 would need financial support from family to help with the cost of living.

As a result, over a quarter of people aged 50 and over would consider releasing funds against the value of their property and 40 per cent feel comfortable with the idea overall.

In Scotland, this rises to a third of people aged 50-plus who would be happy to raise equity through their home to support a family member.

 

Comparison across the UK

Andrea Roberts, national account manager at Hodge, said: “It stands to reason that people living in different areas of the UK are going to feel financially challenged in different ways, in accordance with the pressures of the economic climate presented by the individual region in which they happen to live.

“What’s interesting about these findings is it’s not the areas of the UK we might conventionally consider as being the wealthiest where people are most willing to draw on the value of their own assets to benefit those dear to them in a financial sense.

“London property prices mean those living in the capital have more equity in their homes to share, which may not necessarily be the case across Scotland.”

She continued: “This could suggest people across the UK are becoming far more savvy in the way they distribute their wealth generationally, and increasingly flexible in their attitudes towards drawing on the foundations of a family financially in order to provide a better future.”

“This is positive news in the current climate, where it’s becoming abundantly clear from our ongoing research that people living across the UK are going to be asking family members for help financially for some time to come.”

Hodge has recently lowered later life rates three times in as many months towards the end of last year and at the start of this year.

The lender has also enhanced criteria to lower the stress test for pound-for-pound remortgages, increasing income multiples on purchase and remortgage, and a reduction in living costs in light of the changes to the energy price cap.

Roberts said: “Our focus at Hodge has always been to respond to market pressures with the aim of supporting the brokers we work with and their own customers in the moments that matter – and we’re working harder than ever in light of this research to make sure that continues.

“With this in mind, the ability to release equity from homes to help our loved ones out in times of need is proving increasingly useful within the current economic climate, and I can only commend the generosity of the Scottish people in leading the way on this!”

Equity release ‘increasingly being used by the middle classes’

Equity release ‘increasingly being used by the middle classes’

According to Pure Retirement, the firm saw an uptick in 2023 equity release applications from homeowners with a property value between £250,000 and £399,999 to 36 per cent. This is a rise from 35 per cent in 2022.

The lender added that applications for properties between £400,000 and £549,999 have jumped to 19 per cent in 2023, an increase from 17 per cent in 2022.

Pure Retirement, which recently removed fees on its Classic products, said that such applications for properties between £550,000 and £699,999 stayed unchanged on an annual basis at eight per cent.

The lender added that the data showed that the middle classes were “firmly comfortable” in using equity release to support family members through gifting, as 12 per cent of equity release among owners with properties valued between £400,00 and £700,000 went towards a living inheritance.

The report noted that those applications from applicants who owned homes more than halved between 2022 and 2023 from one per cent to 0.4 per cent.

Those applying with properties valued between £100,00 and £249,999 fell two per cent year-on-year (YOY) to 26 per cent in 2023.

Pure Retirement’s CEO Paul Carter said: “These latest figures demonstrate unequivocally that lifetime mortgages are anything but a product of last resort for those from lower socioeconomic groups, and have instead evolved to become an effective financial planning tool for over-55s from all walks of life.

“The shifts in house values among applicants points to equity release increasingly being used by the middle classes, with one in 25 cases also coming from owners of £1m properties, underlying the broad audience that modern and sophisticated equity release products now appeal to thanks to ongoing product development.”