Photograph of Andrea Rozario, the author of this document.

A long Way From The Peak Of Our Potential

In these most unpredictable of times, people search for certainty. Nobody really knows how long this will go on and what lasting impact it will have on society and people’s lives. Beyond the obvious physical and mental strain the pandemic has had, and continues to have, the damage to the public purse and people’s pockets has been enormous. In 2020 alone, GDP fell a whopping 9.8%, an unprecedented decline in modern times. Meanwhile, the government has had to support millions of people with vital things like furlough, but this has come at the cost of plunging the country further into debt. Last year’s coronavirus support cost upwards of £250 billion and will cost an additional £90 billion throughout this year and next. For the individual, many have been surviving on a fraction of their salary and struggling to make ends meet. But, for millions of people up and down the country, there is an asset that could save the day – property.

As the whole world turns upside down and stock markets live in constant flux, property prices have grown steadily. Even in the face of a barrage of scepticism and predictions of a crash, the UK housing market looks like it will continue its climb. According to recent data analysis from Canada Life, some £650 billion of equity was available for release in properties across Britain in Q1 of this year. What’s more, this figure represents a £50 billion increase from the final quarter of 2020. Massive growth, considering everything that is going on. But why is this happening? The stamp duty holiday, extended by the government at the last Budget, has certainly helped keep the market ticking, but there’s more to it than that. The simple supply versus demand question looms large over the market and, although it is a tale as old as time, we do actually need to start building more homes. But it’s not that either. In my opinion, the primary reason is that people are just smart. More and more are realising that putting money into bricks and mortar is one of the safest and wisest things you can do, and the pandemonium of the pandemic has crystallised this in thousands of people’s minds.

But what is the significance of this for equity release? Well, the main takeaway for me is that although we have had an excellent last few years and the market appears steady in the face of all the upheaval, we are still a long way from the peak of our potential. With £650 billion of equity in the market right now, equity release is currently only accessing around 0.6% of that total annually, based on the £3.89bn released last year. Now, I’m not saying that lifetime mortgages are going to be right for everyone, or half, or even one in ten, but I do believe that we can be helping more people than we are and we should look at increasing this 0.6% number considerably.

How do we go about this? As ever, the answer is in delivering choice and options for our customers. There has been a huge increase in the number of lifetime mortgages available for customers today. In fact, in 2020 a new lifetime mortgage was launched every 28 hours, which is one of my favourite stats from recent times. But we can always go further – why not one every 24 hours? A nice round number to aim for. Plus, I would love to see more heavy hitting lenders join the party. A few more major names throwing their hat in the ring would really energise equity release and take us forward.

And then we need to go further with spreading knowledge and understanding of our products. I still think there is a severe knowledge gap for the average man on the street when it comes to lifetime mortgages, in fact there was some recent research published claiming that two thirds of homeowners aged over 55 don’t understand equity release, and that’s on us. We need to intensify and redouble our efforts when it comes to successfully marketing equity release and letting potential customers know about the flexibility, choice and wide array of options that make up the modern market.

Overall, I am confident for the future of equity release. There is clearly massive amounts of untapped equity out there and with more products, better marketing and little more effort our little corner of the mortgage arena can become a serious contender.

Source:

  • https://commonslibrary.parliament.uk/research-briefings/cbp-8866/
  • https://www.mortgageintroducer.com/annual-lending-equity-release-reaches-3-89-bn/3
  • https://www.yourmortgage.co.uk/equity-release/a-new-equity-release-product-launched-every-28-hours-in-2020/