Data released by Key Later Life Finance this week revealed that 2022 was a record year for the equity release market, with sales of plans jumping by a quarter to reach £5.58bn of new lending.
Mortgage brokers told Mortgage Solutions of the drivers behind the equity release advice route they have adopted, while concerns were raised around the qualifications required to advise on this area of the market.
Doing it properly
Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, said that she only does equity release cases through referrals, rather than actively marketing her services.
She continued: “There is no way I would partner up with another firm. I have clients who have approached some of these larger firms with their glossy TV ads and have felt very intimidated into signing up for something they don’t fully understand. Plus some of them charge hundreds of pounds in fees ‒ when the commission is already very generous ‒ which quite frankly is a rip-off.”
Sebastian Riemann, director of Virtus Private Finance, said that his firm has kept equity release in-house, noting that it is a “highly specialised area”, and that great care needs to be taken when advising on this segment of the market.
He said the firm has partnered with other firms, allowing them to refer clients to Virtus should they be unable to advise on equity release deals.
Meeting a need
Stuart Gregory, managing director of Lentune Mortgage Consultancy, explained that his firm adopted a different approach to equity release around four years ago, when they found that more new clients were looking to refinance their homes but were struggling to meet the lending criteria of high street lenders.
He continued: “Over time, we found that more financial advisers we knew were also looking for ways to assist their clients, who may be looking to assist their children with providing deposits for their own purchases.
“Looking at our local market, it also seemed that not many local brokers were taking the time to advise in this area of finance. That really focussed us on the need to be able to provide this service with a more personal touch.”
The specialist route
However, some brokers have argued their clients are better served by being referred to specialists.
Mark Hosker, mortgage adviser and CEO of Cyborg Finance, said that his firm had opted to partner with an equity release specialist in order to help clients who might benefit from that form of later life lending.
He continued: “Equity release is a vital product to offer, but it may not always be the best option for every individual. By referring clients to a specialist, we ensure that they receive expert advice for their needs and circumstances. Our commitment to specialism drives our approach, we dislike ‘Jack of all trades’ in consumer finance.”
Ease of access
King called for action over qualifications around equity release advice.
She explained: “My beef, that I have been banging on about for ages, is that equity release advisers don’t have to be mortgage qualified. So a client looking for lending in retirement may not be offered standard mortgages or RIOs as an option.”
Riemann said there was “some concern around the ease of access” for advisers to offer equity release products, and argued this was something for the regulator to address.
He continued: “The qualifications required to offer advice are akin to those needed for mortgage advice ‒ it does appear that some of the drive for offering RIO and equity release products has stemmed from the legacy issues around pure interest only mortgage although these products, now being fully regulated, can offer very good solutions to a large number of clients for varying reasons.”
What does the future hold for equity release?
Riemann suggested that the increase in the value of equity release transactions may have related to the growth in house prices, and cautioned that as property prices stagnate there was a decent chance that the market “will level off somewhat”.
He added: “There are a number of pitfalls with the cost of living crisis and squeeze on the economy, so I would urge caution for all advisers involved in this area. It does appear that ultra low interest rates have also come to an end so the current contractions may be here to stay in the medium to long term.”
Unless clients require the money urgently, King said she is advising potential equity release clients to hold fire. “Rates are falling, albeit slowly, and I expect them to fall further.”
