The research report entitled Consumer Demand for Retirement Borrowing, by the University of Birmingham and University of Essex for the CML, said questions remained about the extent to which the financial services industry is fully equipped to deliver on retirement borrowing solutions.
The CML questioned whether government should play a greater role in enabling both the industry and consumers to meet retirement needs more effectively.
It pointed out that the government has made a significant effort in subsidising mortgage borrowing for working age people through schemes such as Right to Buy and Help to Buy, but has largely relied on the financial services industry to manage the risks and costs of equity lending into retirement.
The report said: “With policies geared towards encouraging more people to make use of the equity tied up in their own homes, to support themselves and remain financially secure after retirement, there is a case to be made for the state to rethink its role in sharing some of the risks associated with housing finance for older people.”
The CML’s report identified a number of gaps and barriers in the retirement lending space, noting that the negative image associated with equity release and the perceived need for greater flexibility and innovation in these products was preventing wider take-up and growth.
It added that the dwindling number of home reversion products in equity release could be down to adviser and provider bias towards lifetime mortgages.
“Any discussion of the evolution of the equity release market should therefore give due consideration to the role of reversions or other such equity loan schemes in meeting the needs of those with a preference for non-mortgage based products,” it said.
Over the coming weeks, the CML will publish a set of proposals to support key stakeholders in addressing some of the issues in retirement borrowing.
