There has been a significant jump in the number of products brokers and their clients have available to choose from in recent years. Data from Moneyfacts revealed that the overall number of deals has jumped from just 40 in February 2014 to 201 today. Indeed, in the last 12 months alone there has been a notable increase from the 131 equity release products in the market, leading to the firm to describe lenders as increasing their product lines “vigorously”.
It’s not just the number of deals in the market that has improved though. Moneyfacts found that the average interest rate charged has fallen over the same five year period, from 6.10 per cent to 5.24 per cent, while the number of deals that charge a product fee has declined from 95 per cent of the market to 79 per cent.
Steve Wilkie, managing director of Responsible Life, suggested that the “exploding” level of choice and competition was a clear indicator that the equity release sector is “on the march”.
He continued: “Older borrowers have been chronically under served and ignored by many lenders, and it is very difficult in many areas of the country to downsize because the right types of property just aren’t available in large enough numbers. Tens of thousands of people have literally had no other choice.”
Leading the way
Craig Parkinson, mortgage and protection consultant at Continuum, noted that the newer lenders in the market were leading the way on innovation, with the older “stalwarts” of the industry playing catch up.
He continued: “Choice drives innovation – Legal & General, for example, recently brought out its ‘Income Lifetime Mortgage’ giving clients the option to take a regular payment per month as opposed to a larger lump sum withdrawal, which helps keep interest build up lower for the clients.
“I have no doubt that this product will be tweaked further, but other providers will soon come to the market with their own version of this. They have to or they will miss out on business.”
Stuart Wilson, managing partner at the Later Life Academy, noted that an increase in product numbers did not in and of itself mean an improvement in innovation.
He added: “The good news is that the more the market grows the more commercially-viable it will be for new providers and current providers with increasing appetite, and this in turn creates a healthy environment for innovation as providers jostle for market share.
“A historical issue here was that when the market was £1-2 billion it simply wasn’t worth entering for many bigger funders, but that is now changing.”
Brokers entering the market
Where once equity release was viewed with some scepticism by a segment of the intermediary market, brokers now appear to be more willing than ever to diversify into the sector.
A Mortgage Solutions poll this month found that almost three quarters of brokers (73 per cent) would appoint an equity release specialist or take an equity release qualification, with just 17% ruling out moving into equity release at all.
Parkinson noted that the “grey cloud” that hung over equity release prior to regulation is now disappearing, adding: “We as brokers can only help that further by educating our clients in this market should they need to look down this route.”
Wilson noted that the Academy was working with a wide range of both individual advisers, as well as networks and IFA firms, who wanted support and bespoke training in later life lending.
“It’s good to see enthusiasm from firms previously ignoring the sector but it is now more vital than ever to do the homework and partner up with the right organisations to ensure we all keep striving for better and better delivery of customer outcome,” he added.