Chris Prior is manager of sales and distribution at Bridgewater Equity Release
When stakeholders within the equity release market talk about the sector’s potential for growth, it is easy for those not involved to dismiss the predictions as fanciful, biased optimism. But with cold, hard facts to back these claims up, it becomes clear that equity release is not only very much on the up, but has massive untapped potential to aid its future development. Half the battle is increasing awareness of equity release so that older homeowners know they have the option to make their property work for them but, as with the unclaimed £64m EuroMillions ticket, people sometimes don’t realise the money they are sitting on.
Recent research revealed that retired homeowners have a total property wealth of £756.3bn. While equity release won’t be required by – or necessarily suitable for – all of these individuals, if even the tiniest fraction of this was tapped into it would boost the market beyond recognition. When you consider the equity release market was worth around £800m in 2011 according to the Equity Release Council, it shows you the vast capacity available and the importance of continued education and explanation of the benefits releasing equity can bring.
Given the ageing population of the UK, it is not beyond reason to expect the figure of total property wealth of retired homeowners to exceed one trillion pounds in the not too distant future. According to figures released by the Office of National Statistics, there are now more 65-year olds in the UK than at any point in history. There were more than 726,000 64-year olds in England and Wales when the 2011 census was conducted which means that more than 169,000 more people have reached – or are about to reach – their 65th birthday this year than last.
In 2013 it is expected that in excess of 720,000 will reach state retirement age and although the numbers are then expected to tail off a little, there will still be more than 600,000 people turning 65 each year until at least 2018 and, in total, 3.3 million people are set to hit pensionable age in the next five years. This current spike may be explained by the first wave of baby boomers reaching 65, but with an increasing population and improved life expectancies, there is nothing to suggest this rate of new retirees will dwindle any time soon.
Converting even a percentage of these newly retired individuals into equity release customers is easier said than done, but providers and advisers can’t say they haven’t got a massive potential audience. It is down to the sector’s key protagonists – alongside support from the media and, more importantly, the Government – to sing the praises of home reversion plans and lifetime mortgages, and let older homeowners know just how easy it can be to release equity built up in property and the vast range of uses it can be put to. It won’t happen overnight, but with the Equity Release Council helping all stakeholders move in the right direction, an increase in market size is eminently achievable.