They can be used for a multitude of purposes: from home improvements to intergenerational gifting, or simply improving your standard of living in retirement. In some cases, for those that do not have adequate pension provision, using the equity in their home can be the difference between financial hardship and a comfortable lifestyle.
However, despite the increasing relevance of lifetime mortgages, the industry’s current approach to advising on the product may be creating a less than ideal outcome for both clients and advisers.
Data from the Equity Release Council demonstrates that the number of people using lifetime mortgages as part of their financial planning has more than doubled over the last decade.
This is likely to be driven by a number of factors. Firstly, house price increases have remained consistently high in this period, crystallising property wealth as one of the most valuable assets at a homeowner’s disposal. In the last year alone, despite broader financial uncertainty, the UK has continued to see double-digit house price growth.
Also, the lifetime mortgage market has continued to evolve to offer better customer outcomes, from lower rates to increased product choices and greater protections, such as the no-negative equity guarantee.
However, despite the potential benefits and consumer demand, there is still a very real possibility that many people, for whom a lifetime mortgage would be the ideal solution, are not being offered it.
Improving customer outcomes
In the UK, there are currently more than 30,000 mortgage advisers. But only around 20 per cent of these are currently trained to advise on, or arrange, equity release for their clients.
This means that a key solution for a growing number of homeowners is potentially being left out of financial advice, which is a problem that should be addressed if we’re to offer truly holistic solutions to suit all customer needs. There is also the possibility that many advisers are missing out on the opportunity to grow their own business as a result.
As an industry, we have a responsibility to ensure that financial advice is constantly evolving, adapting to customers’ needs as and when they begin to change.
Lifetime mortgages have clearly changed to better meet customer requirements and are uniquely suited to help many asset-affluent customers realise better lifestyles; this demand is only likely to continue to increase.
I believe the financial advice industry needs to overhaul the way advisers currently earn qualifications relating to equity release, so that lifetime mortgage product knowledge is built into at-retirement training for all advisers.
While a lifetime mortgage may not be the appropriate solution for every situation, it’s only by offering people a truly comprehensive range of products that we can really guarantee the best possible customer outcomes.
