It’s been encouraging to see, however, that the equity release market has continued its prolonged period of growth, contributing to record levels of whole-of-year lending last year.
From a 32 per cent year-on-year drop in new activity levels in Q2 2020, the industry saw a 35 per cent increase 12 months later (surpassing pre-pandemic levels) and setting up a strong foundation on which to build, culminating in predicted total lending of £6bn in 2022. This has been underlined by the latest, very encouraging figures from the Equity Release Council which not only show a 26 per cent year-on-year rise in new business levels, but also show a total H1 combined lending of over £3bn.
Change in borrower type
The growing diversity among the demographics of those taking out equity release is equally newsworthy, if not more so. Not only does it point to the sector becoming an increasingly important and recognised part of wider retirement planning, but it definitively disproves the outdated trope that lifetime mortgages are products of last resort.
The scale with which the perception around lifetime mortgages and equity release has changed, is illustrated well by the anecdotal evidence among consumers that it’s become accepted discourse in golf course clubhouses. Likewise, analysis of our own customer data between 2018 and 2021 has unearthed a marked uptick in activity among those from the higher-value property bands.
While the key headline has been a 500 per cent increase in the proportion of our business coming from those owning properties of at least £1m (with a 60 per cent increase from 2020 to 2021 alone), it’s worth looking at the wider holistic picture. Compared to 2018, the proportion of customers taking out plans who owned properties of at least £400,000 in 2021 has risen 75 per cent, with a 23 per cent increase between 2020 and 2021 alone.
While rising property values have naturally had a hand in some of these trends, they don’t account for all of them by any means, and certainly don’t explain the patterns among those at the very top end of the property market.
Keeping informed
While this demographic diversification is vital for the continued growth of the sector, it’s contingent on all of us as a sector to collectively recognise and understand the changing landscape and to ensure best outcomes for customers.
This presents a unique challenge for advisers as they seek to find the best retirement solution for a wide variety of needs and circumstances, and it’s imperative that they’re suitably supported to help them achieve this.
We’ve long appreciated the importance of effective adviser interaction and education, right from their entry to the market. This has included us partnering with the Equity Release Council on the updated Adviser Guide to Equity Release, as well as presenting at their quarterly new member induction events.
While the current pattern of market growth is undoubtedly encouraging, it’s important that we don’t lose sight of the changing and widening audience that we’re engaging with. Similarly, we need to recognise the challenges this diversification can present for advisers, and work with them to achieve best outcomes for those who are exploring equity release as a retirement planning tool.
