Recent research from Lloyds Bank suggested that not only are first-time buyers having to turn to the ‘bank of mum and dad’ for help in finding the necessary deposit levels needed to buy, but increasingly second-steppers are having to plough the same route in order to move on.
For parents and grandparents, the financial commitment appears to be growing all the time, with their offspring’s wage levels unable to keep pace with rising house prices, and the debate about housing supply not actually turning into new build on the increase.
Some might say that the baby-boomer generation has benefited the most from house price inflation over the last couple of decades and there should be a passing down of property wealth between the generations. But, how can this be achieved? After all, sitting in a property worth hundreds of thousands of pounds without a mortgage, and accessing that money to help children and grandchildren, tend to be two very different things. Particularly in the mind of the owner.
The equity release option
Perhaps all those champions of equity release who have repeatedly suggested that the product’s time will come, may now actually be right.
So, as advisers, can we make the case for greater use of equity release in order to allow the younger generation to firstly, buy a property, and then move on from it? I suspect that today that argument has a much better chance of finding a sympathetic ear than in previous years, particularly when you add in the difficulty older borrowers are having in terms of remortgaging their properties.
In pre-MMR days, the remortgage option to release equity in the family home in order to help the kids would probably have been the first resort. However, with this perhaps not an option, where do these people go next? The answer is they either have to delve into their own savings, they may be willing to access a pension pot, or they might now consider that equity release is no longer a last resort but a credible choice for solving this particular problem.
Of course the issue for many mortgage advisers is how to raise the topic, and which direction to point their clients in for the necessary specialist equity release advice. It’s not an understatement to say that most mortgage advisers won’t have the necessary qualifications or authorisations to do it themselves, so the importance of securing an introducer relationship with someone who does will be important.
The Holy Grail for equity release stakeholders has been the product as a mainstream option for older homeowners. I tend to think that we are still some way from this, however, incremental moves are being made all the time. As long as the younger generation want to buy (and move on) from their own homes but don’t have the necessary savings to do this, I suspect more families will be willing to release their stored equity via lifetime mortgages to help. For advisers, it may be the right time to consider their involvement in such a product sector.