Homeowners withdrew over £4 million a day from their properties via equity release from April to June this year; total lending in the first half of 2015 has jumped up 11% when compared to the first 6 months of 2014; and both the lump sum and drawdown option both experienced solid growth. Breaking records is always a good thing and, as I have stated numerous times, I believe the industry will continue to break records. The question is: how far can we go?
The clients that we serve in the equity release market are the richest in terms of property wealth of any age group. Over 65s control vast amounts of property wealth when compared to their younger counterparts - 30% of over-65s own a property worth over £250,000 compared to just 9% aged 25-34. There is a stark and growing divide between generations that is exacerbating the housing crisis in the UK, home ownership amongst the younger generation is falling - 67% of 25-34 year olds owned their own home in 1991 compared with just 43% in 2011/12 - whereas with the over 65s it is rising - from 62% in 1991 to 79% in 2011/12.
This generational cleft has facilitated the retired demographic controlling huge amounts of property wealth which could be used to fund a more comfortable retirement. This is the obvious reason why equity release lending is setting new records - the elderly population simply have more property wealth at their disposal than ever before.
In terms of concrete figures, the amount of property wealth that the over-65s control is rather debateable. Legal & General estimated that the over-65s may have as much as £1.23tn whereas LV claimed the figure is just under £1tn. So, even if the second half of this year is better still and we hit £2bn in annual lending, the total relative to the possible release is a fraction under 0.6%. The possibility of further growth, therefore, is endless.
According to numerous surveys and questionnaires regarding the over-55s inclination towards equity release, around 15% tend to say they would consider it. Firstly, we must attempt to increase this percentage, but we can also take solace in the fact that if as many as 15% would consider it now, there is much more scope for more lending and much more room for helping people understand products like the lifetime mortgage and the benefits it can bring. If only 10% of over-55s did tap into their housing wealth via equity release, £2bn annual lending would be absolutely small-fry as the annual total would be closer to £33bn.
Some would argue that these figures are rather pie-in-the-sky and will never come to fruition, and they may be right. But we must aim high and continue to help the over-55s convert their biggest asset into something tangible, something that can help them have the retirement they want and deserve.
So long as the lending figures do not become our primary goal and focus – this should always remain with the customer and their needs – we will continue to succeed. A kind of self-fulling prophecy will develop if advisers deliver sound advice to more and more customers and the figures will increase in line with the quality of the advice and service we deliver but we need to ensure the customer truly understands just how equity release works so they can actually make informed decisions with peace of mind based on logic rather than an article they may have read or something they may have heard.
