Research earlier this week from Canada Life found that around a third of pension savers plan to release equity from their homes in order to support their lifestyle in retirement, with those on higher incomes particularly likely to look into equity release. And recent figures from the Equity Release Council shows that record amounts were released by borrowers last year.
While brokers have implemented different strategies for supporting potential equity release borrowers, they were united on the importance of having a plan in place for helping these clients.
Moving into a growing market
Paul Neal, mortgage and equity release specialist at Missing Element Mortgage Services, noted that his firm had recently moved into this market and said it was growing incredibly quickly.
He added: “Many equity release products now also have the flexibility to treat them like an interest-only mortgage, but without many of the hurdles the older generation face when taking one out.”
James McGregor, director at Mesa Financial, noted that lenders are “starting to clock on” to demand and building products that last longer, adding that equity release is likely to be particularly useful within wider scope tax planning for high net worth individuals.
He continued: “I think this will be a great tool to use for older borrowers that end up with much reduced income due to retirement, only as long as they have considerable equity in their property. We will be working on this in the next year alongside another brand we are about to launch.”
John Foster, managing director at Fosters Financial, said his firm opted to hire an in-house equity release adviser two years ago.
He continued: “I could have opted to use a third party. But as the advice is so specialist, I wanted to ensure that our clients received the right advice for their needs. Especially, given its negative perception.
“As mortgage brokers, we should cater for every age group within the housing sector, from first-time buyers to downsizers and unfortunately probates. It’s not only our job, but a huge, missed opportunity if we do not.”
Equity release is complicated
Jane King, mortgage adviser at Ash-Ridge, said she had been advising on equity release for many years.
She said that as with any product, it is a matter of balancing the cost of a lifetime mortgage with the benefit to the homeowner of having some additional funds to enhance and improve their lifestyle in retirement, noting that lifetime mortgages can prove particularly expensive should the interest be rolled up.
King continued: “It is a very complex subject and care must be taken to ensure that the borrower understands all of the ramifications and that the influx of funds do not affect any means tested benefits. I think it can be a very useful product but it is not suitable for everyone.”
A question of volume
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, noted that lifetime mortgages were becoming an increasingly important part of people’s financial planning, and had to be considered alongside retirement interest only (RIO) and standard mortgages.
He added that currently, when he comes across a client who would benefit from discussing lifetime mortgage options, he refers them to an equity release specialist.
“They do not form a large enough part of the enquiries I see to justify me taking the qualifications and doing this business myself; you need to be doing them regularly to be safe and confident you know the market well enough to deliver great advice,” he continued.
“If the amount of enquiries ever changes I may need to revisit this, but currently I am happy that the referral partner we deal with does an excellent job.”
Putting trust in specialists
This viewpoint was echoed by Jonathan Burridge, founding adviser at We Are Money, who said currently the firm does not attract sufficient volumes of equity release business to maintain competency.
He added: “As such we are happy to refer to specialists in our network whose fees are very competitive and who offer a fair revenue share; I know the client outcome is going to be good and we are well remunerated for the origination.”
Burridge noted that the sector is often misunderstood and treated with suspicion by borrowers, but argued the market will grow and that his firm hopes “to be able to offer the valuable advice in house” in the future.
Spotting the opportunity
Stuart Powell, managing director of Ocean Mortgages, argued that any broker who has not yet realised the importance of working with an equity release specialists are missing a huge opportunity, both to deliver a better service to their clients but also for their own business’s growth prospects.
He continued: “First-time buyer deposits are increasingly coming from parents who have released equity from their property. Firms who have clients who paid off their mortgage often get these clients return, wanting to raise funds for home improvements or debt consolidation. Equity release is the future.”
Mark Stallard, director at House and Holiday Home Mortgages, argued that as the clients who brokers look after get older, it’s vital to understand the equity release market so they can continue to provide quality advice and maintain those relationships.
“Equity release has a strong place in the market as long as good advice goes with it,” he added.
