Despite the Financial Conduct Authority (FCA) deciding against a standalone qualification in equity release for brokers – or perhaps even because of it – that growth looks set to continue for the foreseeable future.
With life expectancy rising, equity release will increasingly be an option in people’s retirement planning. The reliance of many first-time buyers on the bank of mum and dad will also potentially swell equity release volumes.
Other growth will inevitably be fuelled further by interest-only prisoners. As thousands of these borrowers find themselves with no means to pay off their mortgages when their term expires, many may well decide they prefer to find another finance option rather than be forced to sell.
For those in the right age bracket with enough equity in their homes, an equity release plan may become increasingly enticing.
That said, with the right retirement income or with other family members willing to guarantee continuous interest payments on their more elderly relative’s behalf, perhaps lenders will allow borrowers to stay in their homes until mortality on a slightly higher margin product than that which has expired. This should still be cheaper than standard equity release.
It is increasingly recognised that a healthy human being may live to 100 years old and even above. This will drive product innovation in the lending into retirement age market, and many mainstream lenders are beginning to recognise this and are changing policy accordingly.
Investment in systems
In particular, equity release providers are in a positive position as they are more expert in this type of lending than the majority of mainstream lenders and, being newer businesses, some have very competent systems capable of offering a good experience both to brokers and to the borrower.
We continue to see investment by both new and existing equity release lenders in technology, helping brokers become more efficient when selling equity release.
Looking forward, this technology is increasingly likely to be rolled out to allow more direct business, increasingly so as it is accepted as more of a mainstream mortgage product.
However, the market will remain mainly intermediated due to the advice required, and with the growing number of intermediaries now selling this product, it looks like everyone is expecting this market to grow very successfully and profitably.