Speaking to Mortgage Solutions, Merrett said it was important to give advisers sufficient tools to get involved with options available to older borrowers.
He added: “The majority of CRM systems available to the average mortgage intermediary… don’t yet have equity release functionality or they might only enable you to do a RIO (retirement interest-only) mortgage.”
Merrett said the market needed to “create the right culture of behaviour” to break down silos and foster holistic advice.
He added: “You’re going to get advisers engaging with it better, and more, if they’ve got the same standard level of support and tools as they have in the bread and butter mainstream.”
Merrett said population size and growth would give the later life market the ability to meet its potential but said adviser fulfillment was a barrier to expansion.
“There’s room for more advisers, or for the existing number of advisers to be able to do more, probably supplemented by technology to make them more efficient,” he added.
He also said more evolution in non-equity release products would foster later life market growth but overall the sector – which completed a record £28.1bn in lending last year – was in a “good place”.
Merrett commended equity release providers for being more flexible in their product offerings and said this was driven by customer needs and circumstances, such as the desire to gift money or capital raising.
He said: “There’ll be a lot of people who, because of the challenges of Covid, now face having to work for longer, because they’ve got to pay the mortgage off.
“But equally, you’ll have people who think ‘after what we’ve just been through with the pandemic, I’m going to retire’.”
Merrett noted that a lot of later life activity was driven by people aged between 55 and 65 who may not be ready for a straightforward equity release product but were also not being catered to by the mainstream market, so could benefit from flexible features such as drawdown facilities.
“I think the lack of available options in mainstream mortgages has probably driven the massive increase we’ve seen in equity release products,” he added.
Aspirational later life solutions
Speaking of Simply Later Life, the proposition launched by SimplyBiz and Key in May last year, Merrett said he wanted to position later life mortgage options as aspirational products.
He added: “Instead of talking about equity release, or later life lending, actually talk about ‘well, this is a vehicle to look at your home more dispassionately and look at it in the same way you might your pension pot or your investments’.
“’This can actually provide the solution for you to be able to help family, tax and wealth planning or support lifestyle’.”
He said he had seen clients who used their home to give them tax-free income and diminish inheritance tax, for example.
Navigating the buy-to-let arena
Merrett also spoke about how the buy-to-let market had changed during the pandemic and said the sector had “almost polarised”.
He said it was harder for brokers to navigate the market after lenders which were funded by securitisations and operating in complex spaces withdrew while mainstream buy-to-let providers restricted criteria.
“Overnight almost, you had LTVs (loan to values) change, criteria change, funding lines change. And as a result, brokers had to unlearn what they already learned,” he said.
Merrett said this had already been happening in the market, particularly following changes made by the Prudential Regulation Authority (PRA) in 2016 relating to tax.
“Before interest cover ratio (ICR) changes, rather than before Covid, I used to know most of the lender’s calculations. It was all fairly straightforward.
“And now they’re all fairly nuanced. Are they taking a five-year product? Is there capital raising? Are they doing a limited company, non-limited company? So, whether you use an aggregated calculator like Mortgage Broker Tools, or whether you go and do individual calculations, you have to use something to ensure that you’re getting the right answer and ultimately good customer outcomes.”
He also said requirements on landlords to improve properties had made things more complicated as options for those needing additional borrowing could be “challenging”.
This can lead landlords to avoid additional borrowing products altogether as it was more “problematic”, Merrett said. However, as both residential and buy-to-let borrowers shift towards five-year fixes, Merrett said this could cause issues in the future when money is needed to improve homes and meet regulatory deadlines.
The green agenda
Merrett said borrowers were not “proactively thinking” about making their homes greener but said advisers had a role to play in raising awareness “just as they have to play a part in educating people and taking protection”.
“However, I think the majority of advisers probably don’t yet feel equipped and ready to be able to do that,” he added.
He said there were still limitations with green mortgage product availability, as the majority rewarded homes which already had higher energy performance certificate (EPC) ratings.
Merrett added: “What we need to do in the market is create a culture of green or energy efficient adoption. And you do that through raising awareness and education.
“In terms of products, and I think we’re a long way with it. Everything that’s happened is good and positive. But I think we’re a long way away from things that really fit the purpose of what’s needed.”
