High street banks are now beginning to enhance their lending into retirement criteria – can new entrants still provide a competitive offering and what do you predict for the future of retirement lending?
The future of later life lending has never looked so good and we expect this to continue well into the beginning of 2017 as new funding and more mainstream lenders join the market. With an ever-growing ageing population there is a clear societal need for retirement lending and there lies huge opportunity for lenders. The over 65s sit on around one trillion pounds of housing wealth and this creates exciting prospects for lending products in this age group, that are not necessarily restricted to just equity release. Recent research from more 2 life shows this particular age group require greater lending options along with a need for flexible products specifically designed for them.
Equity release has reportedly seen a surge post pension freedoms. Do you see this continuing and will Brexit affect the sector?
Yes, absolutely. The equity release market has been experiencing a huge surge over the past year in new business and the Equity Release Council figures show that 2016 is lining up to be another record breaking year. Our prediction is that lending this year will be close too or even surpass the £2 billion prediction.
As far as a potential ‘Brexit’ is concerned, there is a lot of talk around what may happen but for the time being it is business as usual until we officially exit which of course will not be for at least another two years. The main hype has been around the impact it could have on the UK housing market, with the possibility of a decrease in house prices. The key thing to bear in mind is that many clients seeking equity release do not necessarily need or choose a ‘max cash’ solution, so even if house prices did fall in a post-Brexit Britain (and it’s not clear if they would or not) then it would likely only have a marginal impact on equity release lending as a whole.
How can equity release be better integrated into retirement planning, and what benefits would this bring?
Ultimately, we need more advisers who are willing to talk about equity release with their clients and discuss the options. It is important to note this is not limited to advisers who hold the expertise themselves; if an adviser does not feel comfortable in advising they can refer their client to a an adviser that specialises in equity release. This will ensure their client gets the help they need, in what can be a complex area of financial planning.
The Government also have a part to play, for example when new legislations or schemes are launched, there should be a wealth of information on offer to educate the public. When Pension Wise was launched to help people with the new pension freedoms, very little information was given online or in literature about equity release as an option for funding retirement. Hopefully, the new Government will be able to address this issue, so that customers can seek out retirement lending solutions and ask their financial advisers about their options.
How do you see the relationship between pensions and later life products evolving?
It is inevitable that more and more advisers will start to enter the retirement lending space as the conversation starts to include retirement income solutions. I predict there will be a surge in advisers working predominantly within the pension and retirement planning space who refer equity release cases to retirement lending specialists. Since the introduction of Pension Freedoms, it has become increasingly important for consumers to find the best financial outcome for their situation, by considering both the unlocked value in their property and their pension savings. This alone will drive conversation about later life products between advisers and clients.
If you could see one headline about financial services in 2016, what would it be?
Extra funding support of more 2 life the innovative ER lender led to the subsequent launch of a new suite of innovative products that helped drive total equity release lending in the market above 2.5bn, with 2017 predicted to be in excess of 4bn.
