The equity release market had broken through the £1bn barrier and things were looking bright again. However, we didn’t stop there.
In the five years since, the market has continued its impressive renaissance and I would argue we are in a stronger position now than we have ever been.
And the data backs this up. According to figures released by the Equity Release Council, the second quarter of 2018 was a monumental one as customers released £971m in a single three month period – nearly a billion in a single quarter! But the future will be even stronger.
Tip of the iceberg
Regardless of the rapid growth we have experienced in equity release, I really believe we are still just scratching the surface. 2018 will be another record year, but how far can we really go? More 2 Life CEO, Dave Harris, recently suggested that “we could be approaching an impressive £1bn a month in the next five years”, and I couldn’t agree more.
In truth, I think that £1bn a month should be our minimum goal for the next five years and we could really go a whole lot further. Why the confidence? Well, just look at the facts.
Spelling it out
Our target market, the older homeowner, has for decades been in control of the largest chunk of equity within the UK. Estimates vary, but most agree that the over-65s control at least £1trn worth of property wealth throughout the nation. That’s far more than their younger counterparts who, as we all know, are struggling to climb the housing ladder in any way comparable to the way their parents and grandparents did.
This £1trn figure is important as it reveals the true potential and distance we have left to travel in equity release. The £4bn predicted to be released this year equates to just 0.4% of the £1trn that is out there, which should really bring us down to earth.
Now, obviously not every penny of pensioners property wealth should be released using lifetime mortgages, but we are certainly an option for far more than 1 in 250 homeowners!
If we come back to Dave Harris’s billion a month prediction, this would take us up to 1.2% of the £1tn that is out there. And this is definitely where we should be targeting. For me, I know that we will continue to be a niche area of the broader mortgage market, but getting above 1% could be another symbolic moment.
Just as when we broke through £1bn in annual lending in 2013, I think getting past 1% of the equity available will be a massive moment.
Approaching the mainstream
The mainstream is nearly here. The impressive performance of Legal & General plus the arrival of high street heavyweights like Nationwide has certainly moved us toward more general acceptance.
However, we need to be doing more business for the Average Joe to really understand what equity release is and why it should be an important consideration for their retirement finance plans.
Nearly reaching £1bn in a single quarter is impressive, but there’s so much more out there.
As a market we have proved that we do not rest on our laurels, as we kicked on impressively after breaking the billion barrier back in 2013 – and we need this momentum to not only continue, but accelerate.
Of course, focusing only on lending figures and totals is not everything, as creating products that our customers need and remaining a robust and, more importantly, safe industry is the primary focus.
But in reality, to attract more big lenders and more help from regulators and government, we need to continue to prove that equity release is ready to take its seat at the top table.
L&G has proved that if you take the market by the scruff of its neck, the response will be going from market newbie to market leader in record time.
The industry is ready, we just need more lenders prepared to be confident enough to push equity release to the heights I know it is capable of reaching. I think these next five years will be massive, so strap in.
Andrea Rozario is chief corporate officer at Bower Retirement