By most estimates and given that reversions are one of only two equity release options available, reversions should really be hitting the heights of 10% to 15% of all sales.
The fact that they do not is down to a number of reasons, but progress is being made, particularly in the intermediary space where we have been busy educating and informing on the potential uses for reversion plans.
That said, we still have a long way to go and the home reversion space would benefit in a number of areas were the following to take place.
Firstly, I’m keen to see 2012 herald some more competition into the marketplace.
Choice is clearly good for the consumer and having other providers promoting the benefits of reversions to advisers would only be a good thing.
Getting those new entrants or, perhaps more likely, having previous players coming back out of ‘retirement’, will bring a significant boost to the market.
With the euro crisis not resolved and a further recession looming, we are all wondering whether house prices will take a further dip. If so, then we are likely to see this translate into far more interest in reversions from both advisers and consumers.
Both will soon have to come to terms with the prospect of low or even negative house price inflation for the foreseeable future – in this scenario having the option to pass the house price inflation risk to the provider will become even more attractive.
Sadly, recession and high inflation will likely mean more older consumers will find their debts reach a point when they are not manageable.
Remortgages for the over-65s are largely a thing of the past and so swapping debt for home equity will mean the funds not used to service debt will boost retirement income. Again, in a situation where a customer has a high debt level, home reversions are attractive as they allow them to typically to release a higher percentage cash sum.
Finally, a growth trend I anticipate will continue is the use of home reversions to assist over-65s in ‘trading up’ their properties.
Bridgewater saw a three-fold increase in this type of business throughout 2010 and I would expect us to see similar levels of growth by the time we reach the end of this year.
Increasingly, advisers, estate agents and customers are recognising that this option is available in order to finance a house move in retirement – plus, rather crucially, it doesn’t involve the client have to prove affordability.
All in all, I am personally very excited about the prospects for home reversions in the next 12 months and beyond.
Progress is being made and we have worked hard to dispel the myths about reversions. Advisers are increasingly looking at the reversion option for their client and I see no reason why this will not continue in the months and years ahead.
Peter Welch is head of sales and distribution at Bridgewater Equity Release
