The lifetime mortgage market did well throughout 2016 as annual lending records were broken, new lenders joined the market and exciting products were launched, writes Andrea Rozario, but will 2017 be another bumper year, and what can be done to ensure this year beats the last?
Our Adviser Tracker predicts another strong year, with 97% of our advisers expecting another increase in annual lending. Obviously, lending figures are not the be all and end all, but they do represent an important yardstick for the total success of the industry.
I agree with our advisers that this year will follow the pattern of the last few years in smashing through the £2bn benchmark.
By 2020, the largest proportion of our advisers predict that the entire market will have passed the £3bn mark, but I think we can easily surpass £3bn and a target of £4bn is feasible.
Despite this positive outlook, advisers remain rightly concerned about a number of factors within the industry, but most of these concerns are something I feel we can tackle successfully in 2017. For example, more than 60% of our advisers feel that the main barrier to clients going forward with equity release involves worries about leaving an inheritance.
In reality, it is possible for a lifetime mortgage to have inheritance protection built in. The industry wide no negative equity guarantee ensures the debt can never be higher than the value of the property.
If inheritance is a major concern to a customer, protecting an element of equity is entirely possible thereby ensuring that customers always have something to pass on.
Other product features such as monthly repayment options or paying off capital can also help to keep an element of equity intact.
To really address customers’ concerns about losing all their equity and having nothing left to pass on in inheritance, we must intensify our efforts in educating people about the truth of equity release and the product features.
Far too many people attend the first meeting with a limited understanding of the lifetime mortgage (only 22% of our advisers say customers they meet for the first time are well informed) so we must tackle this issue of education head on in any way we can in 2017.
The wider family
Linked to this lack of education and understanding are the concerns of the wider family – something nearly half of our advisers claim is one of their main stumbling blocks.
It is critical that advisers assess and understand the concerns of the family and take them into consideration. But explaining to families that their relatives will never lose their home and can achieve a retirement many may not have thought possible tends to calm any concerns families have.
As an industry, we are clearly failing to get this point across on a wide enough scale, and this must be another of our key goals for 2017. These discussions can actually result in the family understanding the relative’s issues and finding a way to help them without the need for equity release.
One of the final targets we should set for this year must be to back and support the improvement of the lifetime mortgage as a product.
We have seen flexibility added to many lifetime mortgages and interest rates fall across the market. But for equity release to become established in the mainstream, we need to diversify.
The main thing our advisers want to see is higher LTVs from the lifetime mortgages they can offer their clients.
Although this is not necessarily as easy to achieve as some might think, perhaps as potential lenders’ confidence in the market begins to match advisers’, we will see higher LTVs. Customers will be able to access more of their property wealth and fund a retirement they want and deserve.
Andrea Rozario is chief corporate officer at Bower Retirement