Ian Wilson, head of Halifax Intermediaries and Scottish Widows Bank
The equity release market for some intermediaries is still a largely untapped layer of the mortgage market.
Estimated by the Equity Release Council (ERC) to be valued at around £4bn a year1, we anticipate the sector will continue to grow in both relevance and volume over the coming years and, as such, it should form part of an intermediary’s toolbox.
Indeed, the ERC’s latest market report shows that homeowners accessed £1.15bn of property wealth through an equity release product in the third quarter of this year — a 19% increase on the amount unlocked in the third quarter of 2020.
This shouldn’t be a product area that intermediaries fear
This is the first time £1bn has been accessed over four consecutive quarters on record.
Multiple drivers
Both an ageing population and a gap in pension provision have the potential to escalate demand for equity release even further.
In addition, there is the negative impact the Covid pandemic has had on the finances of many of those in their 50s.
The latest Scottish Widows Retirement Report shows people in this cohort bore the brunt of income losses during the pandemic.
The more learning we can do as an industry, the more we can assist
Our research found more than half — 53% — of people in their 50s fear running out of money in retirement, and in the first three months of 2021 alone, 383,000 over-55s withdrew money from their pension — a 10% jump on the same period last year.2
Alongside this is the increase in house prices many areas of the UK have witnessed over the past decade, meaning some may find themselves asset rich and, as a result, look to release some of the equity in their home. This may be for a variety of purposes, such as funding renovation work, booking a long-sought holiday abroad, or helping younger family members with the gift of an early inheritance.
And, on the latter point, there is also an increasing reliance on the ‘Bank of Mum and Dad’ to help navigate the persistent challenge many first-time buyers (FTBs) face in gaining a footing on the housing ladder.
Even if you’re not advising a client yourself but are referring them instead, it’s still good to have a working knowledge of equity release
It is estimated that almost one in four housing transactions has the backing of the Bank of Mum and Dad.3 This is perhaps not surprising given the average FTB deposit paid in 2020 was £57,278, according to Halifax.4
And in October this year Halifax calculated annual house price growth of 8.1% overall and, for FTBs specifically, growth of 9.2%.
All of these factors have the potential to cause an uplift in demand for equity release.
TV advertisements
We have no doubt all watched a television advertisement for equity release at some point in the past 12 months and there is a strong chance many of your clients will have done so too.
It is likely the first person they will look to for advice on this is you.
It is surely no coincidence that the number of equity release products available on the market has jumped from 88 in August 2016 to 698 in August 2021, according to Moneyfacts.
The nature of your role means you are used to operating within rules and regulations, and equity release is simply an extension of that
Scottish Widows research shows that nearly half — 46% — of our independent financial advisers have seen an increase in over-50s seeking financial advice since the start of the pandemic5. Whether it be for pension planning advice, early retirement or accessing their pension pot early, equity release could form part of this.
That’s why, in a market where customer retention is so important, we believe equity release should be part of a mortgage broker’s holistic cradle-to-grave advice offering.
Protecting the vulnerable
Since our relaunch into the market in 2020, doing right by the client has been at the forefront of what we do, which is why all of our 70 business development managers are trained and knowledgeable in equity release.
The increased age of those looking for equity release heightens the chance they may be vulnerable, which is why we make sure we work with brokers to fully understand their customers’ individual circumstances.
We anticipate the sector will continue to grow in both relevance and volume over the coming years and, as such, it should form part of an intermediary’s toolbox
Our products include a number of customer protection features, meaning intermediaries can be confident when recommending them.
Since 2020, we have taken tentative steps into the market. As we go through 2022, we plan to gradually expand this.
While the sector is one that requires specialist knowledge, it shouldn’t be a product area that intermediaries fear. The very nature of your role means you are used to operating within rules and regulations, and equity release is simply an extension of that.
Even if you’re not advising a client yourself but are referring them instead, it’s still good to have a working knowledge of equity release.
The Covid pandemic has had a negative impact on the finances of many of those in their 50s
The market has evolved enormously since its inception and, as it continues to grow, so too do the opportunities for intermediaries to expand their knowledge in the field.
It is worth noting that, while the number of equity release products is increasing and rates are competitive, equity release is not always necessarily the best option for clients and a different product may be better suited to them.
The more learning as an industry we can do through attending professional events, reading market commentary and gaining relevant qualifications, collectively the more we will be able to assist an ageing population with their equity release needs.
1 Equity release customers set to access more than £4bn of property wealth this year| Equity Release Council2 Press release: Covid threatens pushing over-50s into pension poverty (scottishwidows.co.uk)3 Bank of Mum and Dad to drive UK housing market recovery after Covid-19, says Legal & General | Legal & General (legalandgeneral.com)4 Soaring house prices failed to deter first-time buyers in 2020 (lloydsbankinggroup.com)5 Pandemic sparks surge in over-50s seeking advice (scottishwidows.co.uk)
For the use of mortgage intermediaries and other professionals only.Scottish Widows Bank is a trading name of Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales, no. 2065. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 119278. Information correct as of November 2021.
