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At last, lenders are listening to older customers – Tony Ward

by: Tony Ward, CEO and president, Clayton Euro Risk
  • 06/06/2016
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At last, lenders are listening to older customers – Tony Ward
Scanning recent news headlines, I was pleased to see signs of innovation from a mainstream mortgage lender; Nationwide announcing that it wanted to provide a new version of equity release loans.

It was, the lender declared, working on ways to allow older homeowners to release some of the value in their properties to fund care needs or to help their offspring get a foot on the housing ladder.

Chris Rhodes, retail director at Nationwide, said:“There is a clear customer need. We are trying to crack the problem and are in the research and development stage.” Nationwide chief executive Joe Garner also chimed in: “The challenge is how do you do it in a clear, simple, safe and secure way.” Indeed.

Nationwide emphasised that the products it is developing will not resemble traditional equity release schemes, but with “decent fixed interest rates”, free of access charges or penalties and a no-negative-equity guarantee.

Hear, hear. At last, someone appears to be listening to their customers rather than just trying to construct a hedge to their lifetime annuity book. But it will be interesting to see how Nationwide hedges out the various risk components without which this product won’t be sustainable.

Back in November 2015, I made a plea for lenders to explore ways of innovating when it comes to the retirement market. This demographic is expanding significantly but, while equity release products have been creeping back and a record amount of housing wealth was unlocked by homeowners aged 55 plus last year, the level of lending into this segment remains very low compared with mainstream markets. I’m not keen on the term equity release; in my mind, consumers are looking for a wider range of retirement and family lending solutions than the conventional lump sum drawdown equity release products of the past. So I’m intrigued to see what Nationwide comes up with. In the past, equity release products were typically designed by actuaries to be a matching asset to equal the liabilities in an annuity fund; they weren’t designed with the needs of the customer in mind, rather the life company’s balance sheet.

I’ve been championing the development of the disintermediated model for funding by large asset management firms, which streamlines the funding process. Not only is this a more scalable and efficient model, it also lends itself to products like retirement lending in a way that conventional securitisation and annuity funding models cannot.

So let’s see what these new products look like. If Nationwide is going to offer a user-friendly product with the customer’s needs at the heart of their innovation, I completely support this initiative and call on other lenders to follow suit. In the meantime, OneFamily, another mutual, also mentioned that it will be launching an inter-generational mortgage within the next three months. One to watch.

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