The steady increase in house prices is surely one and the ever-rising life expectancy of our population another. But, the real driver of change will come from the coupling of generational shifts toward more liberal outlooks on things like debt in retirement and a huge, yet constantly underrated, amount of generosity from the elderly population.
According to recent research within the industry, as many as a quarter of all equity release customers are releasing money from their homes not in order to fund something for themselves, but rather to stretch out a helping hand to family members.
This gifting has been a huge part of yet another record year for the equity release market, as we smashed through a massive £3bn in lending, and yet this generosity from older people is still overlooked.
Regardless of the success within our industry and the thousands who have been helped by equity release, generosity is rarely the first word that passes the lips of the masses when they discuss the lifetime mortgage.
No, despite the best efforts of every lender, adviser, and professional working in equity release, we are still fighting against a huge amount of negative sentiment and misleading information. I’m not saying that there’s any ‘fake news’ flying around or that people are lying, rather that the majority still focus on the equity release of the past. And reversing this is what will take equity release to the next level.
Of course, equity release today is very different from the industry of the 1990s.
But, although many of the past mistakes have now been rectified and holes plugged by regulation and vital safeguards like the ‘no negative equity guarantee’, many people still have a negative opinion of our products.
Unfortunately, regardless of our success, people are still stuck in the past and still think that taking a mortgage into later life is inherently bad.
However, despite this widespread opinion, things will change. Why? Well, mostly because everything is changing in retirement finance. That may sound a little vague, but just look at how the lives of pensioners are changing.
Not only are they living longer and acting more liberally with their finances (like gifting money to relatives), but pensioners are also being forced into looking for new ways to pay for their retirement because, despite the name, pensioners cannot rely on their pensions any more.
In the very near future, older homeowners will start to see their homes as integral to their retirement plans, and therefore options like equity release will become completely intertwined with retirement decisions.
As the Baby Boomers enter retirement, and the elderly population becomes filled with more liberal ideas about finances and taking on debt in later life, equity release will continue to grow. The shifting outlook of today’s pensioners is brought into clear view by the generosity and gifting I have already mentioned.
Instead of waiting to pass on financial help in their inheritance, today’s pensioners are bridging the generational divide while they are still alive, and equity release is helping this happen.
The negative outlook of the wider society will, therefore, continue to be chipped away at and as the elderly population continues to swell with more free-thinking Baby Boomers, this reversal in outlook will accelerate.
Ultimately, equity release is helping everyone and the consensus will eventually change. With 25% of customers passing on the money they release as gifts, which most report is being used by younger family members for their first deposit, this generosity will be one of the driving forces behind the general population changing their mind on equity release.
However, even if this process is slow, the changing face of retirement finance and the failing of pensions will force the majority to take another look at options like the lifetime mortgage.
It may take some time, but the future of equity release is bright and I for one cannot see a path where the pendulum does not swing towards the masses seeing equity release as a positive option that can help both young and old in society.
Andrea Rozario is chief corporate officer at Bower Retirement