You only have to consider the fact that the over 65s in the UK control around £1.4 trillion of housing wealth to appreciate the potential for the retirement lending market.
Stuart Wilson is channel marketing director, more 2 life
The recent spat between a certain high street supermarket and a certain high street supermarket supplier over a certain yeasty spread, while apparently – and quite literally – having nothing whatsoever to do with equity release, did nevertheless remind me that we are a nation often divided over important issues. Such as how to better fund retirement and how to bring much greater enjoyment to a slice of toast.
Equity release, as we know and love it today, is 25 years old this November. Although the concept of releasing equity for a lifetime loan secured against a property is much older, it has been a quarter of a century since the introduction of the SHIP principles (now the Equity Release Council Standards) that have helped shape and govern this market ever since.
In that time, the market has grown to be worth around £1.7bn last year and likely just over £2bn this year. To the uninitiated, that may seem like fairly modest growth over 25 years, but like trying Marmite for the first time, you soon realise that actually the reality is much better than you imagined.
If we look at the last three years in particular, there has been a doubling of the market size alone (if we accept that this year we will breach the £2bn mark and – barring an unimaginable and unprecedented disaster – we will do so) and we have also seen the arrival of not only several new lenders but also (and perhaps more significantly) new funders.
Consumer demand for (and confidence in) equity release seems to be growing year on year. This is being fueled by a number of factors, not least issues such as the growing number of people aged 65 and above facing Interest Only Mortgage repayment shortfalls and of course the impact of pension freedoms.
While the former issue is a very real concern for the 40,000+ people each year in that age bracket facing a repayment demand from their lender – and undoubtedly equity release is one solution that can make a real difference to their financial outcome – it is the latter that, ultimately, could revolutionise this industry and indeed the retirement planning sector as a whole.
Equity release has the potential to instantly transform a client’s retirement in a way that, arguably, only an unlikely lottery win or an unexpected inheritance windfall could do otherwise. Housing wealth is likely to be the biggest retirement asset a client owns, but it is only now that clients are starting to wake up to the fact that their house is potentially more than just a home – it could the key to a much better, more comfortable retirement.
You only have to consider the fact that the over 65s in the UK control around £1.4 trillion of housing wealth (much of it mortgage free) to appreciate the potential for the retirement lending market. And it doesn’t require much thought to consider the societal impact equity release could have if only more people were aware of it and sought advice on it.
For example, with an average of 25,000 elderly people dying each year as a result of hypothermia because of a fear of a hefty gas or electric bill, equity release has the power to resolve issues pertinent to an ageing and sometimes vulnerable demographic.
Pertinent, if somewhat morbid. But then there is the other side of equity release – the stories about parents releasing cash so their son could fulfill a dream to gain a pilot’s licence and fly a jumbo jet. Or the one about how equity release helped pay for a client’s life-saving cancer treatment only available in America. Or the funds for a six-month trip to Australia to meet grandchildren the clients thought they might never meet in person.
The equity release market is on the cusp of huge growth and it’s an exciting time for those working within it. You may not like Marmite – I cannot help you there I’m afraid, you will forever be on the losing side of the ‘Love It/Hate It’ argument – but I would argue that you cannot help but love a product and a sector that is amongst the fastest growing in Financial Services.
