According to analysis of equity release rates and product choice released by Moneyfacts, the number of deals available has soared from 66 to more than 500.
Competition from new lenders has driven down average rates from 6.15 per cent in 2016 to 4.07 per cent today.
But those who took out early versions of equity release loans do not stand to benefit from product improvements.
No-one’s problem
There is currently no requirement from the Financial Conduct Authority (FCA) for brokers to stay in contact with their clients after they have arranged an equity release loan.
Firms can choose to provide an ongoing advisory service but there is no requirement in the FCA’s rules for any broker to do this, or to assess the ongoing suitability of the plan.
Lifetime mortgage providers have to issue an annual statement that shows the total debt, payments made and interest paid, and no other messaging. Although some, like Aviva, include a standard sentence in the annual statement that says borrowers can ask for a review.
So with the responsibility to review an equity release plan resting on no firm’s shoulders, some borrowers may be forgotten.
Industry must unite
Equity release specialist Stuart Powell, managing director of Ocean Mortgages, said: “The issue we face is that the industry cannot or will not unite to make sure that equity release borrowers remain on the most suitable lifetime mortgage throughout their lives.
“We need to have a system that reviews this advice as clients’ needs and equity release products change over the years.
“The whole industry needs to unite so we can work together in best interests of the client.”
Lots of diligent broker firms do carry out regular, ongoing reviews of their clients’ plans. Although savings cannot always be made, some borrowers have saved tens of thousands of pounds by switching to cheaper plans even after an early repayment charge has been applied.
But orphaned clients, and the clients of brokers who choose not to carry out ongoing suitability reviews are being left in the dark.
Age Partnership recently published a call to arms in a national newspaper for equity release borrowers to get in touch to see if they could save money. Key also advertises for borrowers to contact its advisers.
Powell, however, wants the industry to devise a proactive communication strategy that does not rely on elderly borrowers making the first move.
Lenders in “unique position”
Powell wants to see a working party established that is represented by brokers, lenders, solicitors, the regulator and council and equity release borrowers. The working party, said Powell, should decide on the best approach that involves all stakeholders.
His suggestion is that every other year lenders write to their clients with a copy of the letter being sent to the adviser suggesting the borrower gets a review.
If the original advising broker has not contacted their client within the month, another letter should be sent to the borrower with a list of Equity Release Council adviser members in their area to choose from.
Steve Wilkie, executive chairman of Responsible Life, agrees the sector must come together.
“The industry needs to join forces to communicate with lifetime mortgage customers more effectively,” he said. “They need to be reminded that switching is possible. Ideally, brokers would be encouraged to contact customers at least every two years to stay up to date with the latest rates and products.
“However, switching won’t become as common as it is in the conventional mortgage market because of the nature of the products and the funding behind them but those customers who have held their product for a long time and seen rates change significantly, should be helped.”
A big issue to be tackled, said Wilkie, was customer apathy. “Due to the long-term nature of the products, customers tend to be less proactive about switching, even if they’re aware it is possible,” he said. “Many choose not to switch even when presented with the potential savings by a broker.”
Wilkie wants the Equity Release Council to consider issuing guidelines on best practice to advisers and intermediaries so there is a more universal approach to how this is done and how often.
Key says the vast majority of brokers do monitor when their clients are able to remortgage but lenders have a key role to play.
Will Hale, chief executive of Key, said: “As a first port of call, lenders are in a unique position to be able to signpost customers back to their original adviser or to resources such as the Equity Release Council’s directory of advisers where customers will be able to find someone suitably qualified to assist them.
“Features such as being able to service interest or make ad hoc capital repayments along with fixed term ERCs will mean that more customers will likely be able to benefit from switching. However, advisers also need to play their part too and they need to be speaking to customers who may benefit.”
The Equity Release Council said it has already begun work on improving communication.
Since January, it has been liaising with lenders and advisers to improve industry-wide guidance on maintaining relationships and effective communications with existing customers.
The council said it plans to share the outcome of its work in the autumn.
Legal & General said it was about to launch a trial collaborating with advisers to encourage more regular conversations with customers through the duration of the loan. But it said it was not allowed to contact its own clients directly.
Just said it regularly contacts its clients via its own broker arm.
