Company News

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/

Reasons to remain Confident in the Equity Release Market

The results are in for the first quarter of 2021 and the equity release market has had a dip. According to data from the Equity Release Council, Q1 2021 saw £1.14bn released by 16,527 new or returning customers, a very slight decline from the £1.16bn released in the final three months of 2020. So, we’re hardly talking about a cataclysmic drop off here. In fact, it is heartening that even the smallest of dips seems to cause alarm – after all, we aren’t overly used to the numbers going down.

Rather than causing any sort of panic or worry, these numbers actually give me a lot of confidence. We are in the midst of a global pandemic and so many industries are going backwards in a hurry, and yet here we are – steady eddie. I can only echo the Chairman of The Equity Release Council, David Burrows’, words when he said that these figures prove the market to be ‘robust’. But I also think these figures should lead to some perspective too.

In just three months, and all while the country as well as the world struggles through one of the biggest downturns in recorded history, our market has matched the annual lending of just a few years ago. Breaking the billion barrier back in 2013 was something to be celebrated after 12 months of hard work and graft, but now we surpass that virtually every quarter regardless of what is happening in the world. Yes, we always want to be growing, but a little pause hurts no one. Plus, year-on-year these figures actually represent a 7% increase so things are still heading in the right direction.

So what of the future? Will we be plodding along at the same rate for a while still? It is hard to know the answer for definite and I for one have certainly learned not to second guess the pandemic and, more specifically, the government’s response. But I have a strong suspicion that if we hit the June 21st target there will be a release of pent up demand throughout not just our own industry, but pretty much every industry. I predict that the tail end of 2021 will be setting new records and give equity release the springboard it needs to go to new heights. The important thing now is to be prepared.

There is more choice in modern equity release than ever before, but when things fully open up again I would love to see more lenders and major names get involved. We have the product variety, but some further heavyweight high street names will give customers the confidence they need to explore the lifetime mortgage more vigorously. If my prediction comes to fruition, now would be the perfect time for some new lenders to get involved.

Secondly, as a focus for the second half of the year, I hope the drive continues to get equity release the mainstream acceptance it deserves. It is great seeing so many adverts on the TV for equity release, but I would love to get us to go from daytime to prime time. Equity release needs to be discussed as a serious alternative and giving older homeowners the knowledge and tools to make these decisions is absolutely critical, so more accurate and balanced focus from newspapers and mainstream media outlets is essential.

Ultimately, the solidity of the equity release industry keeps me in high spirits. With so many different businesses struggling at the moment, it is emboldening and motivating that we are remaining so stable. But more than that, I am glad that we can continue to offer our customers the advice, help and products they need to make their life & finances more manageable in these difficult times. I think, once we are out of this pandemic and normal life returns, we will be blowing by all previous records and can set our sights firmly on mainstream acceptance.

Source: https://www.equityreleasecouncil.com

Pent Up Demand for Equity Release

What’s going to happen once this is all over? Well, If I knew that I don’t think I’d be writing this column, but I, like you I am sure, cannot wait for some semblance of normality to return. I don’t think many people would have predicted a year ago that we’d still be in lockdown, so I am certainly not going to tell you that I know where the next turn in this tale will take us – but I do get a sense that we are approaching the final furlong and the end is in sight.

For our industry, what can we expect from the months following the lifting of lockdown? First, and I think this will be true of almost all parts of the economy, I expect to see something we all need – activity.

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The unenviable position of politicians

I don’t envy politicians at the moment. These unprecedented and unpredictable times don’t lend themselves to the nature of modern politics.

One politician I certainly don’t envy is Rishi Sunak. The cataclysmic economy numbers must be tough reading, and figuring out a plan to steer Britain back into the black is definitely a difficult one.

Maybe this is why the media and perhaps even his own party seem determined to give him an easy ride whenever possible – I literally saw a cartoon image of him as Superman during the ‘Eat Out to Help Out’ scheme.

But still, I don’t envy him. In fact, I rarely envy any Chancellor when Budget season rolls around. The speeches always seem to go on forever – the all-time record is 4 hours and 45 minutes – and today’s Chancellors never seem to take up the offer of the boozy nerve-steadier, a tradition that goes back to Victorian times. A crying shame in my books.

Rishi & co have put together a Budget that will look to fight back against the huge 10% nosedive the economy took in 2020, while simultaneously supporting those forced out of work by the pandemic by extending furlough once more.

On balance, I think the Budget seemed measured and carefully considered in the face of an unheard-of challenge. For our industry, the extension of the stamp duty holiday and the 95% mortgage announcements are most certainly newsworthy. And good news at that. The property market has been one of the real areas of solidity throughout this whole period, and helping people on to the ladder, and those already on it stay secure, is a wise move.

Property prices

With everything that has been going on, it is rather remarkable that average house prices nationwide have continued to grow. Commentators and tipsters left and right were falling over themselves to warn of an impending bubble bursting as the pandemic hit, but this hasn’t materialised. In fact, record highs were hit throughout 2020 and by the end of the year average prices were up 8.6% on the previous 12 months, with December seeing the biggest monthly jump since 2014.

Now, the start of 2021 has seen a slight cooling of this house price hot streak – in February average prices dropped by 0.1% – but with this stamp duty news many are predicting another rapid climb.

For my corner of the mortgage market – equity release – this budget seems like it could be well-placed to help our customers do more of what they want with their property wealth – which often is to help their family rather than themselves.

According to recent analysis, some £755m of the total £3.4bn released last year was used to help younger generations get together enough money for a deposit. In these strange times, equity release customers are reaching down and pulling the younger cohort up onto the ladder.

And, as we’ve seen, property has been one of the few solid areas in challenging circumstances, so I am glad our customers can make this happen.

What’s more, beyond the welcome stamp duty news, the budget announcement of government-backed 95% mortgages should mean it’s even easier for more equity release customers to pass on some of their property wealth to their younger family members and help them get on the ladder.

Nearly a quarter of customers are now using lifetime mortgages to help bridge the gap between older homeowners and their younger family, but modern equity release is a diverse and robust market.

There’s still myriad other reasons why people use our products, and things like home improvements, paying off loans, boosting disposable income, funding life experiences or trips and more will always be an option.

In essence, lifetime mortgages can offer those customers for whom it is the right fit, a whole host of ways to make their lives better –  but also their children and grandchildren’s lives too.

Ultimately, this year’s budget might have been the most important of all time – even more so than Gladstone’s 4 hour 45 minute marathon – and within it I think there were some pearls that could help our industry.

The stamp duty holiday will certainly continue to support the housing market, and should mean the price stagnation of the first few months of 2021 will soon be forgotten.

Plus, the 95% government-backed mortgages are good news for prospective buyers across the land.

For equity release, I can only foresee more customers looking to access their property wealth to help their younger family, but there are still dozens of other reasons customers could look to the lifetime mortgage.

Source: https://www.retirement-planner.co.uk/240852/andrea-rozario-the-unenviable-position-of-politicians

MORTGAGE SOLUTIONS

It might not seem like it after a year of being cooped up inside, but the world is still changing out there. Populations, for example, are always evolving and growing in interesting ways. Most interestingly to the later life lending industry, is the steady ‘greying’ of society and the significance this will have for our market and our customers.

According to the always interesting and consistently insightful Equity Release Market Report – distributed quarterly by the Equity Release Council and required reading for anyone dealing with the lifetime mortgage – the “Over-55s account for 75% of UK population growth in recent years and are projected to increase in number by 3.7m by 2030”. The significance of this change for equity release is two-fold. Firstly, these numbers prove our little corner of the mortgage industry is here to stay. With a swell of millions more people eligible for a lifetime mortgage coming in the next few years, our offering will reach more customers than ever before.

But secondly, and most importantly, the increase in numbers within the over-55s population will also turn up the heat on everyone involved with our industry to deliver the best products & advice available. With so many more over 55s in the country, we must redouble our efforts and make sure this is the opportunity we take to make equity release the mainstream stalwart I believe it can and should be.

Product launches, for example, have been a huge area of success for equity release as there are more lifetime mortgages available today than ever before. In 2020, customers had access to over 500 different products and a new lifetime mortgage was launched, on average, nearly every single day. But this should only be the start. With population growth speeding onward as it is, new products and more choice is key to making sure we keep up.

Beyond this, we need to continue to foster modern training and expertise within our adviser pool. The pandemic has allowed advisers to become more adept with technology and other 21st century solutions, but we need to make sure these improvements remain in the advice arsenal of our advisers way beyond the end of the pandemic. The new over 55s coming in the next 15 years will be more familiar with tech than any other cohort previous, and we need to make sure we are on top of any and all modern developments.

And finally, with this growing over-55s population coming round the bend, I would love the entire industry to realise that equity release can be a solution for all sorts of people at many different times in their life. Yes, the average customer age still sits at a shade over 70, but I would really like to see some more innovative and flexible products aimed at the 55 – 60 market. This population is going to grow and grow, so coming up with options for them will be so important to our future success.

Source: https://www.equityreleasecouncil.com/wp-content/uploads/2020/04/200421-Equity-Release-Council-Spring-2020-Market-Report-press-release-FINAL.pdf

MORTGAGE INTRODUCER

There’s always a risk when talking about a rather specific, somewhat niche part of a broader industry that you create an echo chamber for yourself. I often wonder when writing these columns, what does the regular Joe really think about equity release? Does the average man on the street really know much about our industry? I doubt it. To hit the heights I know we can, reversing this trend must be at the heart of everything we do. There has been a huge growth in the awareness of equity release in the past decade, but we need to push the accelerator and go much further.

What do you think most people would say if they were asked about equity release? I imagine many would still think our business hasn’t changed much in the past 20 years. For those that do back themselves as being clued up on the lifetime mortgage, I’d bet most would trot out the classic ‘expensive last resort’ line. Luckily, I think responses would be very different if you asked actual equity release customers, and we would get a more even-handed review. But herein lies the problem – the average person (i.e the average potential customer) only becomes fully educated on equity release after they get involved, so we need to make sure they know more before they even meet an adviser.

For instance, would most people realise that a number of equity release products now let you service the interest? According to the most recent Equity Release Market Report, distributed quarterly by the Equity Release Council, interest servicing features on new products have risen 80%. The rise of this feature has made modern equity release almost unrecognisable from the market of just a few years ago, but we need to let the people know!

So what about making voluntary or partial payments? Again, this is another feature that I am pretty sure most people would think is not a perk of equity release. And yet, this too is on the rise – up 65%. The industry in 2021 is always looking to give our customers choice and options, so now we need to make the prospective customer well aware of this too.

And speaking of choice, I would love more people throughout society to know that equity release isn’t some kind of monolith. There is so much choice now. In fact, the variety and choice available in modern equity release, especially recently, is staggering. There are over 300 different products available and in just the last year choices for customers have increased by 42%. And this has been a trend over recent years and I can only foresee this continuing and choice growing & growing.

And finally, what about people’s fears and anxiety about using equity release? We have had to deal with a lot of myths and misnomers over the years, and there is still a distance left to travel here. Not enough people know about safeguards that form the bedrock of today’s equity release industry – things like the ‘No Negative Equity Guarantee’ for example need to be better understood prior to any first adviser meeting. But also other safety nets and protections like the ‘Inheritance Guarantee’ that forms a part of so many new plans, which again is another feature on the rise with 20% more lifetime mortgages offering this protection year on year.

Ultimately, equity release is still a fringe concern and the general population are not clued up enough. But they are getting there. This has been a battle of attrition and I imagine it will continue this way, but I can feel the mood changing. Just seeing ads on TV for equity release proves we are knocking on the door of mainstream acceptance, but we need to continue banging the drum. The over-55s population is set to increase by 3 million over the next 15 years, so many more people will be looking at options like this. Giving them all the facts and all the information they deserve to make their own choice is the most important thing for everyone.

If we can get to a place where the lifetime mortgage is talked about in the same breath as a traditional mortgage, we will be on the right road. Once this happens, our little fringe industry will get to the level I know it deserves and needs to be at. Righting wrongs and educating people whenever we can has to be the way we get there.

The Covid financial pinch

Beyond the obvious and tragic consequences of the global pandemic, another pervasive impact has hurt millions throughout this crisis. According to a recent survey from the FCA, Covid-19 has resulted in a huge financial pinch for a majority of Brits. The Financial Lives Survey, which took a deep dive into the financial security of the nation, revealed that some 52% of UK residents could be considered financially vulnerable – which equates to over 27 million people. What’s more, in the month of October 2020 alone, around a third (nearly 16 million people) said they expected their household income to fall, and more worryingly still some 13.2 million people worried they would not be able to make ends meet.

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Standards and Safeguards Continue to Evolve

What’s the best sign of a buoyant market? It can’t always come down to the bottom line and cold hard turnover and takings. For me, one of the best signs that a market is doing particularly well is nothing to do with the figures, and more to do with something a little more nuanced. Namely, how many eyeballs and how much scrutiny is on everything you do. Or, to put it another way, how many standards and safeguards are in place to ensure that your customers only ever get the best of the best.

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