"The evolution of equity release is not merely a retrospective exercise but an ongoing journey with exciting possibilities."
Equity release has undergone a remarkable transformation in a relatively short span, highlighting the dynamic nature of an industry that I am proud to be a part of. Looking back, it is both enlightening and humbling to witness the journey and acknowledge the positive changes that have shaped our field.
“As we knew it”
Historically, equity release plans were characterised by interest rolling up, accumulating on the balance until the clients entered long-term care or passed away. Rates, often starting at 6 or 7, were the standard. In 2017, a mere 86 products were available, with discussions revolving around the need for ad-hoc, penalty-free voluntary or partial repayments, accompanied by an increase in defined early repayment charge options.
“As we see it”
The sector responded to the evolving needs of customers with remarkable innovations and ongoing rate fluctuations to stay aligned with market dynamics. The current headline rate fluctuates around 5.26% MER. While seemingly distant from the sub 3-4% rates in recent years, a long-term perspective reveals that anything sub 4% was considered low. Importantly, these rates are generally fixed for life.
Standard plan features allowing overpayments, defined early repayment charges, and online submissions, were once groundbreaking developments. Reflecting on this progress is essential, but equally important is looking ahead and contemplating what further advancements we can anticipate.
When it comes to product offering we are seeing new features, products and even lenders enter the sector. Standing us in good stead for the year ahead. Referring back to the earlier product offering, there were a mere 86 products back in 2017, the count grew to 315 by the end of 2019 and pushing 600 throughout 2022. Not forgetting the pandemic throughout that period too. Over the course of 2023 we have seen the product numbers surpass 200 and as we stand in early 2024, the landscape continues to evolve, and the question lingers: What new figures will emerge for this year?
Late-life lending options are attracting a more diverse range of customers, reshaping the landscape of our industry. Amidst growing competitiveness, we find ourselves in an ideal position to craft solutions that cater to various requirements and circumstances. The clientele today differs significantly from that of a decade ago.
Enhancements in payment flexibility, minimal penalties for changes in circumstances, and fixed ERCs across the board are becoming standard. Yet, as we navigate an increasingly competitive environment, we ponder: Will funders' risk appetite widen? What will constitute suitable security in a decade compared to now? Modern construction methods and new builds challenge the notion of properties built to a "last forever" standard, raising critical questions about the future of equity release.
In conclusion, the evolution of equity release is not merely a retrospective exercise but an ongoing journey with exciting possibilities. While we've witnessed a rewind on lender product offerings, activity, and loan sizes, product innovation has amplified the flexibility of lifetime mortgages for end consumers.
As we further embrace change, the industry's resilience and adaptability position us to address emerging challenges and continue providing innovative solutions to meet the diverse needs of our clients.