Some commentators believe we may be past the worst when it comes to the impact on interest rates, although clearly wider concerns about the economy are here to stay for the foreseeable future.
For homeowners who are re-evaluating their financial situation, whether that is for the short-term or long-term, the option of equity release should be explored as part of a wider financial evaluation. Equity release is a long-term financial commitment, and it may not be right for everyone. In recent months with higher interest rates, there are undoubtedly would-be customers whose spending plans for their housing wealth are more aspirational than essential and are likely to wait to understand more about what the new year will bring.
The importance of housing wealth to meet financial needs in later life means membership of the Council has continued to grow, which is a clear endorsement of carefully dispensed advice and future-proofed product design which our standards represent. Nearly 1,850 individual members now pledge to practice in line with Council standards, and the arrival of names like EY, Deloitte and Willis Towers Watson reinforce the increasing market maturity of our sector as well as future potential.
Have pricing increases started to unwind?
The summer months saw the equity release market resume its pre-pandemic growth trajectory, with extra protections having been added in the intervening years so all new customers can make voluntary partial repayments without penalty when they can afford to and reduce their overall costs.
We believe this is a very welcome option for customers at this challenging time.
While recent turbulence in financial markets has added to upward pressure on interest rates – product flexibilities and stringent safeguards mean modern equity release remains one of the most secure and adaptable way to access the money tied up in your home without giving up ownership or risking repossession through fixed repayment commitments.
With the value of UK homes having passed £7trn, people increasingly recognised that their property wealth is not only their biggest financial asset but can be put to work in later life to support themselves and family now. The option of equity release, which is a long-term financial commitment, should be carefully considered by consumers, and the desire to secure lower interest rates before anticipated rises is likely to have influenced customers’ timings as they completed deals from earlier in the year.
We have been heartened by levels of engagement and participation among our growing membership in regulatory, policy and compliance work to embed and expand best practice, so customers’ trust in equity release continues to be rewarded.
What are the expectations for the equity release market going into next year?
2022 shows just how unpredictable a 12-month period can be.
With uncertainties about the UK’s economic health, it is all the more important to be sensitive to the growing pressures on customers and their ability to maintain their living standards as we head into the new year. With so many demands on individual finances, it is important that advisers understand the unique circumstances for each customer when helping to identify solutions that will stand the test of time.
The Council now has nearly 1,850 individual members drawn from 750 firms, which brings the 2,000-member milestone into sight for 2023.
The benefits to consumers are two-fold: first, it means more firms than ever are voluntarily committing to go above and beyond formal regulation by adopting industry best practice. Second, it means the Council can draw on more input from a broader range of firms than ever before as we look to progress our work to improve the customer experience.
The Financial Conduct Authority’s Consumer Duty will provide to be a significant evolution for all retail financial service markets. The consumer protection standards outlined by the Consumer Duty represent one of the most significant changes for retail financial services and reflects the council’s wish for consumer-centric financial products and a change of culture throughout all parts of the industry. Customers need to be at the forefront of any future product development and any changes to how the industry advises customers about their options when it comes to later life lending. Deloitte is supporting the Council to produce a guidance document for distributors and lenders relating to the key considerations and inputs when developing a fair value framework and completing a fair value assessment.
We anticipate this work will be ready to share with members in early January and are delighted that the Financial Conduct Authority will be joining the Council for a webinar for members of the Consumer Duty.
We anticipate that the drivers for the market, based on consumer need, our rapidly ageing population and under-pinned by our standards, will remain strong although we believe that many will continue to use equity release to repay secured mortgages, clear debt and help younger generations, before releasing equity for holidays and home renovations.
Clearly well advised customers may well see the benefits of property wealth for tax planning purposes. As ever, it’s important to view a customer’s whole financial situation holistically and put housing wealth alongside pensions, savings, investment accounts and other sources of finance.
