Yes, we were and will always remain a somewhat niche area of the wider mortgage market, but equity release was solid, and choice was growing. Then the lockdowns came and things were somewhat derailed.
The impact of the pandemic seemed also to seep into Westminster as a number of odd and overly bold decisions have sent interest rates flying, as we all know. However, at times like these I think it’s important to look over the long view. How has equity release grown and matured over the last 20 years or so?
To me, this modern generation of the lifetime mortgage is one we can look back on with pride but also one that has set the groundwork for an impressive recovery – which I am confident will come.
Adapting to change
The most important thing we can do for our customers is provide them with flexibility and choice, and we’ve done this in varying ways over the last few decades. In 2005, it was the lump sum option that dominated the market, with the newly launched drawdown products accounting for just 501 new plans.
However, jump forward a decade and that number grew to 14,979. What’s more, again according to Council data, this meant that ‘drawdown lifetime mortgages accounted for two in three (66 per cent) products sold, with lump sum lifetime mortgages making up 34 per cent and home reversion plans fewer than one per cent.’
So, in a 10-year stretch, a brand new offering was launched and then actually became the firm favourite of clients up and down the country. However, the thing I find interesting is skipping forward to today.
Drawdown has not continued that trajectory and dwarfed lump sum, in fact: ‘new customers were broadly split when it comes to product choice: 52 per cent opted for drawdown lifetime mortgages, while 48 per cent of customers opted for a single lump sum.’
Something for everyone
Why is this interesting? Well, to me this signals that equity release can work for people in all sorts of situations – but also change to meet the needs of shifting customer needs.
The fact that drawdown options can dominate one year and then be on an even keel another, proves that our industry is working for people in all sorts of different situations and circumstances. Watching the growth of the drawdown products over the last 20 years or so from a few hundred to tens of thousands fills me with confidence that we are creating products that matter and products that work.
Ultimately, this little history lesson should embolden the market to actually look forward and not back. Yes, 2023 has been rough for most of us and we still have some challenges to face, but the past teaches us that we can, and indeed do, create products and options that our customers need.
Keeping this choice and flexibility rolling is what will cement our place in the future of retirement finance.
