SPECIALIST FINANCE INTRODUCER
EQUITY RELEASE
What equity release can really mean Stuart Wilson CEO, Air Group
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or a number of years, I have talked about the UK equity release market in terms of multiple billions of lending. This was before one might also have added in the wider laterlife lending sector and what it might be able to achieve, specifically with the introduction of RIO mortgages and more mainstream offerings with higher maximum ages. While I would not say I was laughed at, there was certainly a degree of scepticism about my assessment. Of course, the critics said I was always going to over-value the sector because my business was immersed in it; I was bound to talk it up when the reality was this would always be a very small, niche marketplace that was essentially a last resort. For some people, that assessment remains, and if you look at equity release/later-life lending in the context of the wider residential marketplace, then of course it is still looking like a very small piece of the puzzle. But it is growing, and is going to continue to grow, and that bears thinking about if you’re an adviser not currently involved in it. You only have to understand that the fundamentals I have always believed were there to induce greater levels of activity are not just still in existence, but are increasing in relevance every day. The latest figures from the Equity Release Council show lending for the first quarter of 2022 at £1.53bn; lest we forget, until very recently the sector would have been overjoyed to have secured that level of business in a year, let alone in a three-month period. The number of new plans agreed in the same quarter were up 21 per cent on the same period a year ago, while we also saw a new quarterly high of www.mortgageintroducer.com
23,395 new or returning equity release customers within the same timeframe. Again, many of us later-life stakeholders have been around long enough to consider those numbers a good yearly performance, so it will not take much to consider just how far we have come in such a short space of time. That quarterly figure puts us on a yearly run-rate of over £6bn for 2022, and again, without wanting to blow my own trumpet, go back to some opinion pieces I have written over the last couple of years, and you’ll see that I’m predicting big opportunities within the later-life space, which would take us up to and beyond that figure, toward double-digits. In my opinion, we are motoring toward this. This is, by the way, not my attempt to look like Mystic Meg or the later-life lending equivalent of Nostradamus. I am not any kind of industry soothsayer, but what I have been able to see – as many other stakeholders have also witnessed – is a changing environment that places the residential home as one of the go-to assets, if not the only one, for many older homeowners. It’s not so much a perfect storm of conditions, but more the umbrella handily available to help a growing number of homeowners to ensure they are not caught out in the rain. And in so many facets of life for older people, the chances of getting rained on have simply grown and grown. For many years, we have talked about releasing equity for a whole variety of reasons – to pay off debt, to pay for long-term care, to provide for family members and the like, but one reason we might not have realised was going to be so important was simply to pay for the cost of living. Again, it’s not something those active in the sector have overlooked. For many years, I’ve talked about pensioners sat in homes worth hundreds of thousands of pounds but still feeling unable to put their heating on throughout the winter. This gets to the very crux of being asset rich/cash poor, and as the year has
progressed this underlying need has grown in importance. 2022 will represent an incredibly difficult year for many older homeowners, particularly those already retired, with fixed incomes, wondering just how they will pay for more expensive energy bills, let alone the increase in the cost of living evident across all manner of items, particularly petrol, but also food, clothing – you name it. With inflation likely to top 10 per cent very soon, I don’t need to point out what that means for pensioners, and you’ll already have heard many stories about the extremes some people are going to in order to stay warm and fed. Now, of course, equity release or laterlife lending is not going to be suitable for everyone, but I guarantee it will be suitable for some, and it may well be suitable for those most in need. This, I’m afraid, is not a problem that is likely to go away anytime soon, either. The government has said it can only do so much; the Bank of England the same. However, what we might have is a significant number of consumers who will have benefited from increased house values, particularly over the last year, but probably over a much longer period. Many may be unencumbered and therefore may be in the right position to access equity without it having the impact they think it might in terms of inheritance amounts or of what equity they may well need to ‘give up.’ Overall, our sector is there to help people in such situations – to make use of a sizeable asset that, used correctly, can make their lives much easier, or simply allow them to do what they want in their later years. Whether it is to go on a cruise, or simply pay their bills, the option is available to do this, and as a sector we have to continue to espouse this message, to assuage any concerns, and to deliver the readily available solution that will help many, and ensure continued growth for this vitally important market. M I JULY 2022 MORTGAGE INTRODUCER
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