Speaking to Mortgage Solutions, Scott Burman (pictured), head of distribution at Pure Retirement, said the equity release market had seen four successive quarters of growth, and whether that continued “remains to be seen”.
Otherwise, he said the outlook for the market was exciting, and there were signs of growth in the years ahead. Speaking to brokers, he said advisers were seeing more clients come through B2B referrals from mortgage, protection, pension and wealth advisers.
Burman said these advisers were “starting to recognise these areas as an option for their clients”, and the sector was working more collaboratively. Further, the lender’s adviser partners have said they are recruiting and investing in their business to meet this growth and demand.
He said while this may not be seen in more consecutive quarters of growth, “the customer demand is there, and the innovation is there”.
Burman predicted that the market would return to its record £6.2bn level seen in 2022, but noted that it probably would not happen this year. He referred to research carried out by Fairer Finance, which looked at how housing wealth could bridge the finance gap in retirement.
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He said the report highlighted the difficulties faced by older homeowners, as more than half expected they would need to rely on housing wealth to support their lifestyles.
Later life mortgages aligning with the mainstream
Burman added that while Consumer Duty had helped drive some of this, there was not one single reason for the growth of the later life lending sector.
He also said increased innovation in the sector and making products more aligned to mainstream mortgages – such as shorter-term or zero early repayment charges (ERCs) and more flexibility – was also a factor.
This was “supporting mortgage and protection advisers in taking the choice to widen their knowledge and awareness of these products”, he added.
Another aspect was the falling average age of equity release borrowers, which was previously in the early to mid-70s but was now around 67 years old.
Burman also mentioned interest servicing mortgages as a driver for this, describing it as the “closest product” to a mainstream mortgage, particularly an interest-only product.
Burman said: “What we’re seeing is a growth in that and in our figures, 27% of our completions now are for customers paying off mortgage and debt. That’s gone up from 21% year-on-year. We put that down to product innovation, where customers are looking at interest-only in their later years, and comparing it to the option to service the interest with our product.”
The ability to pause interest payments on Pure Retirement’s product if circumstances change was also “opening up borrower opportunities, particularly at lower ages”, he added.
Burman said the lender was also “pleased to see” a growing trend of high-net-worth (HNW) borrowers – defined by Pure Retirement as those with properties worth £850,000 and more – accessing later life mortgages.
“We’re seeing a doubling of customers in this demographic space, which, for me, then sort of proves that equity release does solve, or potentially solve, a wide demographic of customer situations. And it certainly cannot be seen as a product of last resort, which is sort of a legacy hangover,” he added.
Today’s first-time buyers are tomorrow’s later life borrowers
Burman said with the average first-time buyer aged in their 30s and UK Finance data showing that they were taking out mortgage terms of over 30 years, many people were “already committing to a loan from the outset that takes them into retirement”.
He said over the long term, housing could play a part in their retirement as their biggest asset, and equity release could be one way to financially support themselves.
The average age of later life borrowers falling suggests people are more open to taking on debt, whether that is new borrowing or existing, Burman said, adding that the lender was hearing how this was creating positive outcomes, especially around needs-based lending.
There is still aspirational borrowing happening too, Burman added, with people who did not just want to “survive” in retirement, but “thrive”, and the process of doing so was getting smoother.
“Like me and you, maybe we have bucket lists that we will want to tick off, and accessing housing wealth can absolutely achieve that,” he noted.
He referred to Pure Retirement’s MyPure platform, which allows borrowers to access their plan, view how much the interest roll-up is and how much they are paying against their asset. This can also be shared with family to encourage open conversations and advisers to support annual reviews.
Burman said this boosted consumer confidence.
He noted that adviser awareness and confidence were also needed, which was why the lender brought out an adviser guide earlier in the year.
Burman said: “This was something that came up time and time again when newer revised into the market, or advisers that are maybe doing cases less frequently and coming up against common pitfalls and challenges.”
When asked why there was still a gap in adviser knowledge about the later life lending market, Burman, who was also a mortgage broker, said it was probably down to the equity release sector’s “reputational legacy”.
He said some advisers might decide it was not right for them or their clients, but added that this should change as it could lead to consumer harm if all options were not explored.
“They have to take a decision that ‘I’m a holistic adviser, and all options are considered from the outset’. Advisers will step away from it, fearing it, but it does need to change,” he added.
Pure Retirement’s adviser guide has broadened its distribution and helped to raise awareness, but still, Burman said there were “not enough advisers moving into this market” and said he worried there would not be enough advisers to service the future levels of demand.
Even within the product transfer market, Burman said, based on demographics, around a fifth of borrowers could be over the age of 55 and may benefit from a later life mortgage instead.
He said mainstream mortgage advisers should at least “be curious” about the equity release market and consider it as an option for clients.
This idea is shown in the Equity Release Council’s standards, Burman said, which asks advisers to explore other kinds of lending before equity release is recommended.
“Sticking to the product transfer analogy, that isn’t the case. If you’re a mainstream adviser dealing with a 65-year-old client and doing a product transfer, you don’t have to evidence that you’ve explored later life options,” he added.
He said this should be a catalyst for advisers to consider later life mortgages for older clients before the regulator starts asking questions.
