The equity release renaissance shows no signs of slowing down.
This once small niche of the mortgage arena is now a real player that nobody can ignore, and recent data from the Equity Release Council has shown that the future should be just as bright.
Over the last five years, the number of borrowers accessing their housing wealth through equity release has doubled, and every day more people are understanding the true benefits of products like the lifetime mortgage. This is no mean feat for an industry that has gone through difficult times in recent history, but how can we go to the next level?
With over £3bn released in 2017 alone, the future does look bright but that’s nothing compared to the mainstream market.
However, this comparison is pretty pointless. Just as we get frustrated when our products in the equity release stable are compared directly with traditional mortgages, so too should we be avoiding comparisons between the size of our respective markets.
It’s a typical apples and oranges situation and we should be focusing on more important things, like the products, the customer and how equity release can become a bigger part of retirement planning.
Despite the name, pensioners are no longer able to rely solely on their pension to fund their life in retirement.
Pension pots have been squeezed to such an extent – an issue exacerbated by the nation’s growing life expectancy – that millions of retirees simply don’t have enough saved to afford to retire.
The future of retirement will of course involve pensions but in the future, and the very near future at that, the vast majority of pensioners will have to find another retirement finance option to supplement their income.
With this in mind, fresh data from the the Equity Release Council’s Spring 2018 Market Report, the first of David Burrowes reign as chairman, has revealed that equity release is quickly challenging the old status quo.
The report shows a rapid increase in the use of equity release versus traditional pension pots in just the past few years.
Back in Q2 2016, only 29p of housing wealth was accessed by equity release customers for every £1 accessed via flexible pension payments. However, jump forward to Q4 2016 and housing wealth accounted for 43p of every £1, before rising to 56p just 12 months later in Q4 2017.
In just the past few years, retirees are realising that their home could well be the perfect tool to supplement their retirement income. What’s more, the range of products now available to new equity release customers is making our market ever more attractive.
The Council’s Market Report, which I would suggest as required reading for everyone who works in or even just takes an interest in equity release, goes on to show how choice and options are being offered at a very fast rate.
In January 2017 the report states that there were 69 different products on offer from equity release providers, but by January 2018 this figure had jumped to 86.
Just as with the increase in customers accessing their equity instead of their pension pots, as too has our industry kept up the pace by offering customers the choice they need to unlock their housing wealth in the best way for them. This increase in products is absolutely vital to the continuation of the equity release renaissance, and I am sure we will see the same kind of product development in the next 12 months.
Ultimately, equity release is positioning itself as another option retirees have when they need to fund their life after work.
The diminishing returns of pensions plus the ever-increasing national life expectancy has changed the retirement landscape, but equity release is providing an invaluable alternative.
To ensure that people can have the comfortable retirement they deserve, equity release providers must continue to do what they are already doing and add yet more products to the stable.
There’s an open goal in front of us and all we have to do is continue the progress the council and others have revealed, so by the end of the decade equity release will no longer be seen as a fringe element and rather a major part of the wider mortgage market.
Andrea Rozario is chief corporate officer at Bower Retirement