Special Features

2021 view of the market

Craig Faulkiner | Advise Wise
|
3rd February 2021
Craig Faulkiner Advise Wise
"While we’ll be broadly in line with the 2019 market performance and although significant growth was anticipated in 2020, the Covid curveball could have easily set the market back."

Last month’s news headlines highlighted a £46 billion increase in property wealth for the over 65 years old in the last 12 months. 2020 didn’t yield this level of growth for the equity release market, understandably so given the unprecedented situation the world still finds itself in.

However, we’ve been impressed with how the market has both adapted and performed. While we’ll be broadly in line with the 2019 market performance and although significant growth was anticipated in 2020, the Covid curveball could have easily set the market back.

Although many clients are starting to see property wealth as a valuable tool to improve their later life finances, it’ll take time for this to be realised en masse. But the market is primed to re-enforce this belief, with rates at an all-time low and property value continuing its upward trend.

A great potential

There can be no doubt, this global pandemic is having a significant impact to us all, especially when considering long term plans to our finances. It won’t take peoples aspirations away but will undoubtedly influence clients’ appetite to risk and spending unnecessarily. However, it certainly isn’t doom and gloom.

We saw an instant hiatus on aspirational spending, with clients opting to sit tight and not use equity release to fund holidays, cars and other luxury items. In early 2020 clients were prioritising mortgage repayments, unsecured debts and gifting to family. Recently we’ve seen a steady return to a sense of normality, with many clients opting to raise funds for more aspirational objectives.

Providing there are no significant, unexpected events, we anticipate this trend to continue, as clients look for ways to improve their lifestyle and make dreams come true. Positive customer sentiment and incredibly low rates, fixed for life, could well create the perfect storm for the year ahead. This especially applies to those in or nearing retirement. After the year we’ve had, who doesn’t want to make positive adjustments to their day to day lives or even plan something longer term to look forward to?

This is the perfect time to help customers understand how they can use their property value increase to their advantage, whether they want to help the family out or just enjoy some additional financial security.

Borrowing expectations in 2021

Although the purpose of funds changed over the summer, we have also seen clients using equity release for inheritance tax planning, especially those with properties over £1m. IHT planning can be an area some advisers are wary of. There can be no doubt this is an area that requires skilful advice and cautious planning, but for the right circumstances it can be advantageous.

The historical rule of thumb is if not making payments, the debt doubles every 10 years or so, but with the current low rates, the debt takes over 25 years to double. Not forgetting that many plans now offer optional repayments, giving clients control of the debt and their destiny, should they choose to.

The early signs are that 2021 will be a strong growth year and act as a launch pad for many more years of growth. An opportunity for market stakeholders to see a return on the tireless work put in over many years, but more importantly, for clients to use their assets to enjoy the lifestyle they crave, at the lowest cost to their estate ever seen!

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