As we look forward to further growth on the back of a record breaking 2014 for equity release lending, an analysis of the reasons why more people are turning to housing wealth is varied and revealing.
The most immediately obvious reason is that retirement has become more costly. We are living longer – retirement can now account for almost a third of your lifetime – but in many cases we are not saving enough for when we retire. The Council’s research among over-55 homeowners last month revealed a staggering one in ten skip a meal every week due to financial worries.
With debts to pay, houses to maintain and the desire to leave financial gifts for family often playing on their minds, retirement can present many financial challenges. Rising life expectancy, coupled with poor savings and pensions,is encouraging growing numbers of over-55s to use their housing wealth to plug the funding gap.
Recent developments within the wider financial market have also affected sources of income. The pension and mortgage markets have been turned on their head in the past twelve months. The new pension freedoms are encouraging swathes of people nearing retirement to reconsider their financial planning. In the long term, this will hopefully result in a more engaged and holistic approach to retirement funding, where people use a host of different products – including equity release – depending on their needs and stage of life.
Over-55s are also finding it increasingly hard to access traditional mortgage finance in the wake of the Mortgage Market Review – especially when the desired term stretches beyond retirement age.It is surely no coincidence our Spring Equity Release Market Report revealed that the percentage of equity release customers aged 55-64 rose from 16% in the first half of 2014 to 20% by the year end.
The spotlight on equity release is set to grow in 2015 as these trends continue and providers continue to innovate to meet consumers’ changing needs: for instanceby allowing the option to make monthly interest payments to some plans. We have already seen big names such as Legal & General join the market and aiming to write £100m of equity release business this year. The chances are this will not be the only household name we’ll see launching lifetime mortgages in the near future.
The Council has been working with the FCA to ensure changes resulting from the EU Mortgage Credit Directive do not compromise standards of advice and understanding of lifetime mortgage products. Out on the coalface, advisers are finding themselves increasingly busy as equity release continues its march into the mainstream. It promises to be another landmark year for the sector, and as more consumers look for advice on lifetime mortgages, qualified and committed experts will be well placed to reap the benefits.
