102020Dec

Equity release – The next generation

It’s hard to know how long some things will last. Nobody has twenty-twenty foresight and, especially in this most unpredictable of years, it’s almost always advisable to steer clear of concrete predictions.

However, for equity release, I think we can look forward to many more years of success and growth and its clear all the signs point to equity release staying around for the long haul. 

But how did we get here? In recent history, the market was very different. Lump sum options dominated, limited choice of products and we were barely cracking a billion in lending a year, now the market sails past that most quarters.

The growth in equity release, both in lending and choice, should be celebrated, but I still think we are just scratching the surface. We’ve built a strong foundation, but I think we’re about to progress upwards and onwards.

Confidence

How can I be so sure, you might ask? Well, one thing that does seem apparent is that the younger generation – tomorrow’s older generation – have quite a different view to retirement financial planning than today’s older cohort.

According to the Equity Release Council’s most recent Market Report, as many as 47% of people aged 35 – 44 believe that it will be their property – rather than any pension, savings, stocks or shares – that will be their financial saviour in later life.

Compare this to today’s pensioner population, 39% see their home as the bedrock of their retirement money plans. So, the younger generation, despite only experiencing a fraction of the house price growth that their older peers have benefitted from, are looking to their property to supplement their retirement plans. This is all good news for the future of later life lending, and especially equity release.

The next generation knows that their property will have to play an important part in their retirement funding so we need to be there for them when they need us with the flexible and competitive products they will require.

Beyond this, another reason equity release is going nowhere comes down to the solidity of the UK property market. These past 15 years have been turbulent both financially and politically, and yet the housing market seems to remain more than buoyant.

In fact, in recent years it’s almost always booming. Even in the midst of the pandemic, when every expert and tipster going predicted a cataclysmic crash, the UK property market has only gone one way – up!

In October alone, the Rightmove House Price Index showed that house prices were 5.5% higher than 12 months prior, which is actually the biggest rate of increase for over four years. It seems that, when everything else is crashing around us, the housing market is one of the strongest, most secure investments in the land. Which again is nothing but good news for the longevity of equity release, as the higher house prices go the more equity our customers retain, however as we all know what goes up can come down and explaining this to customers is part of the advice process.

Finally, another reason the lifetime mortgage is here to stay is rather simple – there’s just so many of them now. Customer choice has exploded in recent years and the products on offer today are much more wide-ranging and flexible, our market is truly stronger than ever.

This year, a new equity release product has been launched every 28 hours and today there’s more than six times the amount of options than there were just three years ago. This is massive for everyone involved with equity release. Not only are new lenders and stakeholders betting heavy on the longevity of the lifetime mortgage, customers are now more likely than ever before to find the product that fits their needs.

So, yes. I am indeed confident that equity release is here to stay. All the evidence points to the lifetime mortgage continuing to grow and evolve into an even better option for the UK’s older homeowners.

However, we must not rest on our laurels. What we need to do is to think about how we can improve not just our advice and products, but our broader position in the market and society. We need to think about how equity release can be part of things like the green revolution and net carbon emissions goals, something we at Bower are championing daily through the recently launched green lifetime mortgages. Or how equity release and technology can marry to make the advice experience smoother and easier for all our customers.

This will take time, of course, but I’m glad that equity release has bags of it.