The buzz in the market, as new lenders grapple to get a foothold in what was once a niche sector, is attracting brokers looking to cash in on the growing sector, as the buy-to-let market pauses for breath after an eventful start to the year.
Alongside equity release products, mainstream high street lenders are improving their criteria to cater for older borrowers, particularly those on interest only, nearing the end of the mortgage term.
With so much change, it’s difficult to predict which direction the market will take next. Will it become more closely aligned with the mortgage market, with brokers advising in both spaces, or one which is overshadowed by the likes of Nationwide and Santander; both interested in developing products for older borrower?
This week our panel of experts will give their thoughts on what the equity release market will look like in 12 months from now.
Simon Chalk, technical manager – equity release at Age Partnership, says all eyes are on mainstream lenders to innovate and launch products for customers that fall somewhere between full-time working and retirement.
Andrea Rozario, chief corporate officer at Bower Retirement Services, explains that while new entrants to the market are welcomed, its vital to remember the importance of quality advice.
Bernie Hickman, managing director at Legal & General Individual Retirement, believes the only way is up for the equity release market, with tailored solutions for customers likely to emerge gradually.
With the passing of each quarter we see new records being set in equity release, with greater numbers of borrowers taking new plans and releasing larger sums of money. In a little over two years, Age Partnership has established a field-based adviser team of over 30 and continues to expand both this and its phone-based adviser team to meet growing demand. Job opportunities will carry on increasing across the whole sector to serve customer needs and deliver fresh new plans and features. Our multi-million pound marketing investment and national TV advertising campaign has raised awareness levels, benefitting all advisers everywhere.
Competition among providers will remain hot, as they attempt to court advisers and woo customers with highly attractive terms and low interest rates for some time to come. With household names like Santander and Nationwide teasing us with their intentions of entering the market, you can only believe that other familiar brands are watching their moves with keen interest.
As mainstream lenders slowly begin to reopen the stable door they slammed shut after the horse bolted, attention will increasingly focus on the middle-ground for older borrowers that fall between full-time working, and full-time retirement.
Overbearingly rigid regulatory rules and Solvency 2 do force some limitation on product design, but with whole new funding lines opening up, there will be plenty more innovative plans to come. No amount of red tape can stifle the imagination and enthusiasm within the equity release space now. After all, we’re all British, aren’t we?
Mainstream lenders increasing terms to ages as high as 85 offers more choice to consumers who can afford to make monthly payments. This is good news for an increasing number of people who find they want to tap into their equity and can service the loan. However, there will always be a demand for the option to roll up interest and not make monthly repayments either because they simply cannot afford to do so or they choose not to.
It is possible that we will see a growth in providers offering both options over the next year. Mainstream lenders offering lending into retirement will deliver a halo effect which will have a positive impact on equity release, as customers turn to one option to perhaps discover another option is better suited to their needs.
However, much hinges on the advice they receive and it’s essential that all options are considered and this is the real nub of the issue.
If mainstream lending with longer terms are available then the advice process to sell these products is not the same as that required for equity release – a real concern as customers may not be aware of all the options and the impact of their decisions on future options.
We will most likely see more lenders, more advisers and increasing innovation and flexibility, but there may be a divide between advisers who can ensure the customer is aware of all options and those who can only talk about mainstream products.
We expect the market to continue growing strongly as more and more customers access the money tied up in their homes to fund their retirement.
As customer demand grows we are already seeing more advisers enter the market. There are clear customer needs for retirement lending and we would expect solutions to emerge that meet these needs.
The trends that are driving the growth in lifetime mortgages, such as an ageing population who own their homes, are unstoppable. Compared to the amount of housing equity that could be released, £1.4trn by some estimates, the current market size is a tiny proportion and so there is potential for significant further growth.
Extending mortgage terms will help some customers but not those who want to access housing equity without making ongoing repayments as a lifetime mortgage does.