A little competition never hurt anyone – a saying that has become reality for the equity release market. Over recent months, lifetime lenders have slashed their rates. At the same time, innovative solutions have given advisers and their customers greater choice and flexibility to meet the shifting needs of later life.
Rates in the sector reached a new record low in January when our Flexi Super Light interest rate was cut to 2.67 per cent. In addition, the number of products offering the option to make regular interest payments rose by 80 per cent in 2019, while the array of modern lending features, such as inheritance guarantees, grew notably. This reaction from the sector is a result of one thing in particular: heightened consumer demand.
It’s not big news that today’s generation of retirees faces more active and longer retirements than those before them. As such, a growing number of older customers are demanding greater flexibility and choice from the financial solutions available to them during retirement, prompting fierce competition from lenders. This is good news for the current generation of over-55s, who face more complex financial decisions than their predecessors had to make.
For advisers, increased product choice means being able to serve a greater range of client demands, and ultimately create better outcomes. Advisers have been critical to this boom in product choice by helping lenders develop their ranges.
A key feature of the market last year was a greater focus on drawdown plans. According to Key’s latest market monitor, these accounted for 73 per cent of all plans taken out in 2019. Clearly, more customers are looking to release smaller sums more regularly, so it’s likely lifetime mortgage lenders will continue to develop and launch more of these types of product.
Historically, the equity release market has been slow to offer consumers the same kind of flexibility and choice as offered by the residential sector, but this is changing. In the second half of 2019 alone, £2bn of housing wealth was unlocked by homeowners aged 55 and over who were able to choose from more than 300 lifetime mortgage product options. As the population ages, this consumer demand is unlikely to diminish.
Stuart Wilson, corporate marketing director, More 2 life
