Spry Finance joins Equity Release Council

Spry Finance joins Equity Release Council

The firm is part of the Irish-owned Seniors Money Group, which had more than 15 years of experience offering lifetime loans to over 30,000 customers across the globe. This includes Ireland, Spain, Australia and New Zealand.

By joining the ERC, Spry Finance commits to consumer protections and customer service by adhering to the trade body standards.

The Equity Release Council now has 759 member firms and 1,800 individuals registered.

Jim Boyd, CEO of the ERC, said: “We welcome Spry Finance’s decision to join the ERC, whose standards underpin the UK market, which is considered to be the most sophisticated internationally.

“All advanced major economies are facing the same challenges from a rapidly ageing population and inadequate retirement savings. We are committed to working with Spry and our wider membership to ensure equity release products are safe, flexible and reliable at a time when they are an increasingly important feature of every adviser’s financial planning toolkit.”

John Moriarty, CEO of Spry Finance, said: “As the sole provider of equity release products in the Irish market, we are well aware of both the opportunity for growth and the importance of ensuring good outcomes for every customer.

“Membership of the Council will allow us access learnings and experience that will be helpful to us as we continue to develop and implement our strategies for product development, for marketing and communication and for industry-leading customer service and management.”

The ERC recently added Countrywide Surveying Services (CSS) as an associate member.

Scottish people most comfortable releasing equity to help family

Scottish people most comfortable releasing equity to help family

According to research from Hodge, which gathered views from 1,240 people between 16 and 80-plus, 84 per cent aged under 50 would need financial support from family to help with the cost of living.

As a result, over a quarter of people aged 50 and over would consider releasing funds against the value of their property and 40 per cent feel comfortable with the idea overall.

In Scotland, this rises to a third of people aged 50-plus who would be happy to raise equity through their home to support a family member.

 

Comparison across the UK

Andrea Roberts, national account manager at Hodge, said: “It stands to reason that people living in different areas of the UK are going to feel financially challenged in different ways, in accordance with the pressures of the economic climate presented by the individual region in which they happen to live.

“What’s interesting about these findings is it’s not the areas of the UK we might conventionally consider as being the wealthiest where people are most willing to draw on the value of their own assets to benefit those dear to them in a financial sense.

“London property prices mean those living in the capital have more equity in their homes to share, which may not necessarily be the case across Scotland.”

She continued: “This could suggest people across the UK are becoming far more savvy in the way they distribute their wealth generationally, and increasingly flexible in their attitudes towards drawing on the foundations of a family financially in order to provide a better future.”

“This is positive news in the current climate, where it’s becoming abundantly clear from our ongoing research that people living across the UK are going to be asking family members for help financially for some time to come.”

Hodge has recently lowered later life rates three times in as many months towards the end of last year and at the start of this year.

The lender has also enhanced criteria to lower the stress test for pound-for-pound remortgages, increasing income multiples on purchase and remortgage, and a reduction in living costs in light of the changes to the energy price cap.

Roberts said: “Our focus at Hodge has always been to respond to market pressures with the aim of supporting the brokers we work with and their own customers in the moments that matter – and we’re working harder than ever in light of this research to make sure that continues.

“With this in mind, the ability to release equity from homes to help our loved ones out in times of need is proving increasingly useful within the current economic climate, and I can only commend the generosity of the Scottish people in leading the way on this!”

Equity release ‘increasingly being used by the middle classes’

Equity release ‘increasingly being used by the middle classes’

According to Pure Retirement, the firm saw an uptick in 2023 equity release applications from homeowners with a property value between £250,000 and £399,999 to 36 per cent. This is a rise from 35 per cent in 2022.

The lender added that applications for properties between £400,000 and £549,999 have jumped to 19 per cent in 2023, an increase from 17 per cent in 2022.

Pure Retirement, which recently removed fees on its Classic products, said that such applications for properties between £550,000 and £699,999 stayed unchanged on an annual basis at eight per cent.

The lender added that the data showed that the middle classes were “firmly comfortable” in using equity release to support family members through gifting, as 12 per cent of equity release among owners with properties valued between £400,00 and £700,000 went towards a living inheritance.

The report noted that those applications from applicants who owned homes more than halved between 2022 and 2023 from one per cent to 0.4 per cent.

Those applying with properties valued between £100,00 and £249,999 fell two per cent year-on-year (YOY) to 26 per cent in 2023.

Pure Retirement’s CEO Paul Carter said: “These latest figures demonstrate unequivocally that lifetime mortgages are anything but a product of last resort for those from lower socioeconomic groups, and have instead evolved to become an effective financial planning tool for over-55s from all walks of life.

“The shifts in house values among applicants points to equity release increasingly being used by the middle classes, with one in 25 cases also coming from owners of £1m properties, underlying the broad audience that modern and sophisticated equity release products now appeal to thanks to ongoing product development.”

Clearing a mortgage remains top use of equity release – Canada Life

Clearing a mortgage remains top use of equity release – Canada Life

Data from Canada Life revealed that 41 per cent of people used equity release for this purpose in 2023, making it the sixth year running that this has been the main motivation. 

Home improvements were the second-most common use, with 28 per cent of people naming this, while 17 per cent used the unlocked funds for day-to-day living costs. This was compared to shares of 32 per cent and 20 per cent in 2022 respectively. 

A fifth of people used equity release funds for a holiday, up from a share of 15 per cent in 2022. Canada Life said this brought this back to pre-pandemic levels, when around 21 per cent of people used equity release for this purpose. 

Meanwhile, 16 per cent of people used the product to consolidate unsecured debt, equal to the share of use in 2022 and slightly down on 2021’s segment of 18 per cent of people.

Sadna Zaman (pictured), proposition development manager for home finance at Canada Life, said: “Customers are continuing to use equity release for a wide variety of reasons, from home improvements to paying off existing mortgage borrowing. Day-to-day living remains within the top five reasons for releasing equity, with homeowners using the wealth they have built up in their properties to potentially offset increased outgoings thanks to the cost-of-living crisis.” 

“The variety of motivations for releasing equity highlights the flexibility and accessibility of the options available, allowing homeowners to enjoy their retirement in a way that best suits them and their families. However, equity release is a lifelong financial decision, so it’s vital that the long-term costs are considered.” 

Earlier this week, Canada Life announced that its equity release sales had fallen by £1bn annually to £247m in 2023. This reflected the performance of the wider market, as data from UK Finance showed that later life lending declined by 42 per cent to £4.1bn last year, while figures from the Equity Release Council (ERC) revealed a £4bn drop in lending to £2.6bn.

L&G teams up with Finova for tailored lifetime mortgage pricing

L&G teams up with Finova for tailored lifetime mortgage pricing

L&G Home Finance, which recently introduced a personalised approach to lifetime mortgage pricing, will use Finova’s Optimo decisioning engine platform to consider a borrower’s circumstances, then decide the price for each mortgage application. The lender will also be able to test pricing for new products without making changes to its underlying technology. 

The Optimo platform can analyse a borrower’s data to adjust rates and fees in real time. This is expected to limit the impact of last-minute rate changes and cut the application decision time. 

Optimo’s functions can also be applied to other lending types, such as complex credit. 

Rowan Clayton, product director at Finova, said: “At Finova, we’re always thinking about how our tools can tackle the speed bumps getting in the way of lenders’ daily tasks, and how we can improve the journey for their customers.

 “To that end, we’re thrilled to be sharing our decisioning engine Optimo with L&G Home Finance, who can now lean on our technology when it comes to making rapid decisions about risk, liability, or affordability, for their customers. With Optimo, L&G’s customers can access personalised and fair rates on the market, and crucially, the lender can service borrowers quickly and fairly as the lending price war intensifies.”

Cheryl Hinton, chief technology officer (CTO) at L&G Home Finance, added: “The lifetime mortgage market has evolved significantly over the years, and at L&G Home Finance, we’re always innovating to meet changing customer needs. 

“That’s why we’re delighted to adopt Finova’s flexible Optimo system to help power faster and more tailored pricing decisions, to give borrowers value for money by offering them the best rate for their specific circumstances.” 

Equity release sales dive in 2023 but innovation should boost growth – Key

Equity release sales dive in 2023 but innovation should boost growth – Key

The Key Market Monitor covering 2023 showed that, within this, 51 per cent of sales were for drawdown equity release plans and 48 per cent were for lump sum mortgages. 

The value of new lending for both lump sum and drawdown plans declined by 62 per cent to £2.1bn, while the total amount lent was £2.7bn last year. 

Some £411m of drawdown was provided, as well as £162m of further advances from existing plans. 

Although the equity release market was impacted by base rate rises and the aftermath of the mini budget, Key said there had been a “good boost in consumer demand” at the start of this year. 

The firm said product innovations such as the introduction of payment term lifetime mortgages (PTLTMs) were “very encouraging”. 

This week, More2life announced it had launched a flexi PTLTM, which allowed borrowers to access a higher loan to value (LTV) rate than usual. At the end of last year, Legal and General (L&G) Home Finance also introduced a PTLTM, which it said would bridge the gap between a traditional and retirement interest-only (RIO) mortgage. 

Key said the flexibility offered by lifetime mortgage providers was positive, as 86 per cent of plans sold last year had fixed early repayment charges (ERCs) and 74 per cent had downsizing protection. 

 

Equity release borrower behaviour 

On average, borrowers released £74,148 from their homes, compared to £106,806 the year before, while the average interest paid went up from 5.7 per cent in 2022 to 6.63 per cent in 2023. The average age of borrowers increased slightly from 71 to 72. 

Some 72 per cent of the equity released from their homes was to make mortgage and debt repayments, which was up from a proportion of 67 per cent the year before. Some 12 per cent of the money was used to remortgage existing equity release plans. 

Of the money released, 16 per cent was gifted to family, up from 14 per cent the year prior. Just three per cent was used for a holiday. 

More than a tenth – 12 per cent – of the equity released in 2023 was used for home improvements. 

 

Sector has ‘reasons to be cheerful’ 

Will Hale (pictured), CEO at Key, said: “The later life lending sector does have some real reasons to be cheerful in 2024. We have already seen a good boost in consumer demand as the new year gets into full swing. 

“We have seen the first shoots of some interesting product innovations that can provide a real boost for market growth, whilst addressing unmet customer needs. The variety of products that offer repayment options has increased, and these provide the potential for customers to both release more cash in order to meet all their needs and to reduce their cost of borrowing – two things that have been barriers to volumes post-2022.

“In addition, towards the end of 2023, we saw gilt rates drop to below four per cent, and as base rates drop in 2024, I am confident this will breathe new life into the core equity release market. We should feel confident the later life lending market is set for a return to growth in 2024.” 

Canada Life brings in £247m in equity release sales in 2023

Canada Life brings in £247m in equity release sales in 2023

According to Canada Life’s latest results, this is a decrease from over £1bn in equity release sales in 2022.

The later life lending market had a turbulent year due to rising rates leading to a dampening of activity, with Equity Release Council (ERC) figures showing that overall later life lending came to £2.6bn in 2023, a fall from £6.2bn in 2022.

Data from UK Finance also echo the above, with Q4 2023 figures showing that total lending to older borrowers decreased 42 per cent to £4.1bn.

Canada Life continued that its total sales came to £4.3bn, a record, which included record sales of individual annuities of £1.2bn. The latter is more than double the 2022 figures.

The company reported £621m in bulk purchase annuities along with £2.2bn in wealth and asset management sales, which includes offshore bonds.

Canada Life’s base earnings came to £229m, with assets under management (AUM) coming to £26bn.

The company also confirmed that the sale of its individual protection book had been completed during the period.

Lindsey Rix-Broom, CEO of Canada Life UK, said that the company had “delivered a strong performance in challenging conditions, which demonstrates how we, as a well-diversified business, can weather the ever-changing headwinds”.

She continued: “Our single-minded focus on delivering great customer outcomes means we are well-placed to support advisers and their clients in a period of economic and geopolitical uncertainty.”

Rix-Broom said that, looking ahead, it would “continue to invest in modernising our systems, processes and introducing new digital technology that will further benefit customers and advisers.”

More2life launches flexi payment equity release deal

More2life launches flexi payment equity release deal

Its flexi payment term lifetime mortgage (flexi PTLTM) is for borrowers between the ages of 55 and 62 who can commit to serving part of the interest in order to access higher loan to value (LTV) options compared to what is usually available with a roll-up product. 

More2Life will offer a range of repayment options and LTV tiers to suit each borrower’s needs. 

At first, borrowers will have to make contractual payments of partial interest until the age of 66. Once this ends, the plan will continue as a roll-up mortgage. Additional voluntary payments can be made during the contractual repayment period or after it ceases. 

The product can also be used by borrowers who are already eligible for high LTV lifetime mortgages on a full roll-up basis to reduce their overall cost of borrowing. 

More2Life gave the example of a borrower releasing £67,210 from a property valued at £286,000. The flexi PTLTM paid at an interest rate of 6.11 per cent monthly equivalent rate (MER) will total £297,460 over 11 years. This is compared to the highest LTV lifetime mortgage at 8.79 per cent MER which will cost £393,796 over the same period. 

The product is available on an advised-basis only and will depend on the borrower’s circumstances. The deal also includes a standard no negative equity guarantee. 

Ben Waugh (pictured), managing director at More2Life, said: “As the later life lending market grows, the needs of our clients have changed. We are committed to developing new products to support people who might otherwise be underserved by the industry. Our flexi payment term lifetime mortgage offering partial interest serving is a new concept in later-life lending and is the initial step in our efforts to expand the range of later life products. Whilst the initial scope is limited, we expect to extend both age ranges and payment terms available during the course of 2024. 

“It’s vital that everybody can access the best product for their individual circumstances, and advisers must be having in-depth conversations with their customers that cover the entire range of products on the market. Our flexi PTLTM product fills an important gap and will ensure that advisers can deliver fantastic outcomes for clients utilising affordability that a customer has for mandatory payments to access higher LTVs or reduce their total cost of borrowing.” 

Ageing first-time buyers are blurring mainstream and later life mortgage lines – Bamford

Ageing first-time buyers are blurring mainstream and later life mortgage lines – Bamford

Yet, as I’m sure we all recognise, the average age of first-time buyers has been going up for some time. It may now be in the mid-30s, but some research from mortgage lender Tembo reveals there are large numbers who are not so fortunate and are having to wait much longer. 

The number of first-time buyers in their 20s is in decline, while the number of those aged over 40 continues to increase and, perhaps somewhat shockingly, the number of those who are over 50 has increased by 30 per cent over the past five years. 

And, of course, there will be a large cohort of people who no doubt feel the chances of them ever getting on the ladder are slim to none, never mind having a first mortgage at an age at which, traditionally, many people were paying theirs off. 

  

Ageing out of mainstream mortgages 

It feels bizarre to be saying this, due to the fact we are referring to first-time buyers, but this is effectively ‘later life lending’ because of the mortgage term and where it takes these borrowers. 

It is perhaps unsurprising, therefore, that there is growing noise around the ‘merging’ of mainstream mortgage options that segue way into more specialist later life residential lending. 

After all, if you are unable to get on the housing ladder until you are 50-plus years of age, a 25-year mortgage term takes you well into your 70s, and well past what is – right now – the traditional state pension age. 

Of course, you might still be working in a full-time job at that point, but lenders in particular have to anticipate that the first-time buyer may not be. That buyer may potentially be on a fixed pension income of some sort, which could impact their ability to afford that mortgage at that older age. 

I wonder as well if advisers will now need to focus more on this potential blurring of the mortgage lines.

Indeed, the client doesn’t need to be in their 50s and buying a first home; those in their 40s will have similar issues, while those in their 20s and 30s are already having to take out mortgages with longer terms, which again might not be finished until they are well into ‘retirement’. 

 

All parts working together 

The phrase ‘a mortgage for life’ seems particularly relevant, therefore, and one can’t help but feel advisers in future are going to need to be just as au fait with later life lending options as they are with traditional, mainstream ones. Perhaps we have already reached that point, because affordability and underwriting will be predicated on the ‘end age’ of that borrower when they take out that first (or any) future mortgage. 

Again, it is no wonder that we are seeing a hybrid approach to borrowing becoming more widespread and accepted – mainstream mortgages morphing into residential interest-only or lifetime mortgages, allowing the borrower to keep paying off the loan (or the interest) and still being able to stay in that home for as long as they wish. 

I appreciate it seems odd to be even talking about equity release in relation to first-time buyers, but these first-time buyer age figures are going to necessitate such conversations. Perhaps this will be the major growth market for advisers for the future, especially given the amount of equity tied up in property, a lack of pension provision and all the extra financial responsibilities that most people have later in life. 

With all of this, it is perhaps no wonder that – prior to next month’s Budget – we have heard a lot from various sources about both further support for first-time buyers and, indeed, a rumour of widespread stamp duty changes for those in later life who feel they can’t sell or downsize because of the cost of moving, including a large sum for this tax. 

 

A holistic approach to mortgages 

As always, the interconnectedness of the mortgage market always has to be considered. Maybe that has been a failure of our policymakers over the last two decades in terms of not recognising how, when one area is impacted, so are multiple others.

There has never been a more important time to look at the mortgage and property markets as a whole and to act on that basis. The days of silos appear to be over, and the sooner we have solutions which recognise this, the better. 

Collaboration with specialists crucial option on later life clients ‒ analysis

Collaboration with specialists crucial option on later life clients ‒ analysis

This week, Key launched a new service for mainstream advisers, designed to make it easier to support those with later life needs. 

And brokers argued that having some sort of plan in place for assisting such clients is becoming increasingly important, whether that means taking on the case themselves or working with a referral partner.

 

The need for collaboration

Later life lending is a specialised sector, so should be let to professionals that only operate in that area, argued Martin Stewart, director of London Money. 

He cautioned that there was a “huge potential mis-selling risk with these products”, particularly given family members may have been banking on an inheritance from the family home, only to realise a lot of the money has already gone.

He added: “As a firm, we prefer to send any equity release clients to someone who thoroughly understands the issue, can communicate a complicated product in a very uncomplicated way and is solvent enough to advise a borrower against taking action if that is the best thing for them to do.”

Darryl Dhoffer, adviser at The Mortgage Expert, said that collaborating with qualified equity release specialists can ensure clients “receive appropriate advice”. 

He urged brokers considering their later life options to make sure they do their research and understand the regulations in place. If necessary, it may be better to partner with specialists rather than handle the advice themselves.

Scott Taylor-Barr, principal adviser at Barnsdale Financial Management, said he has always worked with specialists so that he can refer clients as and when suitable.

That works for me, as I don’t see enough of this type of client to maintain the product knowledge and lending contacts to effectively advise in that area myself, and it allows me to concentrate my efforts in the areas where I can deliver the most value to my clients.”

Taylor-Barr noted that this is the same process he uses for areas like commercial lending, pensions and investment enquiries.

 

Boosting your own knowledge

Robert Timm, managing director of Sunland Mortgages, said he has a referral partner that he has used for years with traditional equity release clients, confident that they will receive the same level of service.

However, he said that there has been an increase in later life clients who don’t fit into this box, so he has worked at building his knowledge so that he can be more confident in supporting them himself. 

He continued: “Generally, the time invested on these cases is greater than a typical residential or buy-to-let (BTL) mortgage, but the reward in terms of proc fees and also client satisfaction is, in my opinion, worth it, but only do this if you have confidence in the process and lenders.”

Rowan Frayling, managing director of J Finance, said that his firm had decided to become an expert in this field a few years ago, and so now works with a host of advisers when its clients have later life needs.

He explained: “These advisers often spot an opportunity where perhaps they cannot help with a conventional mortgage and refer the client to us for advice; we specialise in equity release, retirement interest-only (RIO) and more, and can often find solutions for these clients.”

 

Putting plans in place

Simon Bridgland, director of Release Freedom, said that he would only refer to another broker if the needs of the client were outside his own specialism, such as home reversion schemes.

He explained: “My need for referral is greatly reduced as I opted to complete further study and gain valuable experience in the later life sector. This means that more of my time can be spent on cases of a more complex nature or simply where more time is needed to guide a client.”

Bridgland emphasised that brokers need to have “robust support plans” in place for dealing with later life clients, particularly with the introduction of Consumer Duty.

“You only get one chance, so it must be handled carefully. Brokers should form solid relationships with later life advisers they can reach on tap,” he added.

Steven Morris, advising director at Advantage Financial Solutions, said that all options should be considered for later life clients, whether it is handled in house or partly outsourced to specialists.

He warned that the market’s attitude towards ‘order taking’ presented a problem. “How many clients ended up with equity release just because they spoke to an equity release adviser initially? Or a RIO mortgage because their adviser didn’t do equity release? I dread to think.”