FR: How do you see the equity release market changing over the next 12 months?
We predict growth across the board, in terms of the number of customers, the amount borrowed, lenders and advisers.
Equity release is becoming more mainstream, and we’re finding that innovations in the equity release market, and the increasing flexibility of the products,is attracting a new audience.
We are expecting to see some more high profile insurance companies entering the marketplace over the next 12 months, though probably in the lending rather than distribution space.
FR: How has the Mortgage Market Review changed borrowing into retirement and what can the industry do to combat this?
The Mortgage Market Review had a laser focus on affordability and responsible lending. The impact has arguably been the greatest on people living on retirement income.
The timing of it couldn’t have been worse for retirees, as it came at a time when lots were reviewing their interest-only mortgages and looking to extend the term. Suddenly, retirees who have been paying their mortgage for 20-25 years are being rejected for extensions or offered unpalatable terms on remortgages.
The industry needs innovation for lending into retirement. For example, equity release provider Hodge has a Retirement Mortgage product which bridges the gap between traditional mortgages and lifetime mortgages.
And Santander have recognised how neatly lifetime mortgages fill the lending into retirement void, and have announced they will be offering some form of lifetime mortgages to their retired mortgage customers.
With rates falling on lifetime mortgages and the ability to now pay interest payments on a flexible as well as a regular basis, this is providing a viable funding option for retirees.
FR: Do you feel that there are still misconceptions surrounding equity release, and if so, what can be done to further educate consumers?
A general understand of equity release as a product and the range of available products, has improved radically in the last five years.
Five years ago, if a customer knew anything about equity release, they were probably still thinking of a home reversion. Now, a large percentage of people know they are not selling their house.
The next step for us as an industry is to raise awareness of some of the features of the plans, beyond the basic understanding of the lifetime mortgage concept. These features include flexible repayments, the no-negative equity guarantee, and the ability to ring fence equity from the effects of interest roll-up.
One of the myths that raises its head time and again is around inheritance, or lack thereof at the end of the term. Often when the press write about lifetime mortgages they massively understate the effect of house price inflation on equity growth and future inheritance. They will always tell the story of how interest rates roll-up, often with outdated interest rates. They will neglect to tell the story that property prices have been steadily growing over the long-term for as long as most of us can remember. Growth in the property price can offset any interest roll-up. Add to that the media never talk about general inflation.
To educate consumers, we must continue to put out high quality, fair, clear and transparent information to both the public and the media. The media will continue to play a huge role in educating consumers about this product. It is our role to ensure financial journalists have the understanding and information to hand to write a balanced article.
FR: Responsible Equity Release recently picked up the Financial Reporter award for Best Equity Release Broker. Why do you think this is and what affect will it have on business going forward?
We were delighted to win the award, particularly as it was our peers in the financial services sector who voted for us.We think one of our strengths, and the reason we won the award, is the tireless work we do engaging the wider financial intermediary community.
Our Partnership Programme has a vastoutreach with 1000s of professional advisers registered. The programme helps these intermediaries get involved in equity release, through the supply of marketing materials, webinars, updates and a secure referral service if needs be.
FR: If you weren’t working in financial services, what would you be doing?
My background before financial services was marketing, so I would be sat with my mac on a white beach somewhere thinking up new ideason how to sell products.
