Well I’m excited anyway, because for the first time, we have a reliable set of statistics by which to measure performance across the whole sector.
The report offers invaluable insight into the motivation in customers’ decision-making and helps illustrate emerging trends. By better understanding our marketplace, we may develop products that continue to meet our customers’ evolving needs.
A few facts about 2013 caught my interest:
1. The average property valuation, from which money was released, was £254,943; significantly higher than Nationwide’s House Price Index £180,264 average in March 2014.
2. In spite of the average 69 year old client being able to release up to 35%, they chose to take a more modest 22% (£56,917).
3. The 6.36% average fixed interest rate represents tremendous value for such long term finance, beating any form of unsecured borrowing and only marginally higher than ordinary repayment mortgages.
Using the above, I calculated that with a very conservative 2% house price inflation (HPI), the remaining untapped £198,026 of equity actually increases slightly to peak at £205,541 after nine years and only begins to dip below the starting amount after 16 years; slightly above the average life expectancy for a 69 year old man and slightly below for a woman. Just 2% HPI required to maintain equilibrium. Hardly overly optimistic wouldn’t you agree?
Further results suggested two-thirds of plans are drawdown and almost two in three customers are couples, dispelling the myth that equity release only appeals to elderly widows and widowers. Those antagonists opposing people enjoying their own property wealth may be surprised by the findings, but it reaffirms my belief that contrary to what they may think, customers in general do not frivolously ‘spend the kids’ inheritance’.
Rather they are cautious, sensible, individuals prudently managing their financial positions by leveraging the value in their homes to meet their expectations of a much deserved comfortable retirement.
Simon Chalk is technical manager at Age Partnership
