How is the equity release market performing?

The housing market as a whole has been deeply impacted the last few years by a variety of challenges, including but not limited to, the cost-of-living crisis and COVID.

But as stability begins to rear its head in 2024, how has the equity release market performed? Mortgage Introducer reached out to several brokers to find out.

How is the equity release marketing performing in 2024?

Chris Little (pictured left), chief revenue officer at finova, said lenders are actively adapting their strategies to meet the evolving demands of clients, particularly in the realm of equity release products.

“One noticeable trend is the inclination towards diversifying their offerings and providing more flexible payment options, aimed at addressing both the changing needs of customers and the persistent stigma attached to traditional lifetime mortgages,” he said.

An important facet of this adaptation, Little added, is the increasing provision of flexibility for customers to opt for partial or full interest payments, as well as making ad hoc payments.

This approach, he said, empowers borrowers with greater control over their financial commitments, and helps to mitigate the compounding effect of interest accumulation over time, thereby enhancing their overall financial well-being.

However, Little said that despite the positive strides being made, challenges still loom large on the horizon.

“Chief among these is the imperative for technological advancements to effectively manage voluntary and ad hoc payments,” he added.

The market, Little believes, now demands innovative solutions that facilitate the seamless design and implementation of flexible products, ensuring a smoother experience for both lenders and borrowers alike.

Looking at 2024 and beyond, Little said the success of the equity release market hinges upon its ability to overcome these challenges.

“By investing in and leveraging the right technological infrastructure, lenders can pave the way for the creation of truly innovative products that are in perfect alignment with the evolving needs and preferences of their customers,” he said.

What is driving growth in the equity release market?

Simon Bridgland (pictured right), broker and director at Release Freedom, said enquiries for equity release solutions are experiencing steady growth, primarily driven by needs-based motivations such as the necessity to repay interest-only mortgages.

“This upward trajectory in demand is projected to persist throughout 2024, fuelled in part by the impending maturity of nearly 80,000 interest-only mortgages scheduled to conclude this year, leaving a substantial number of individuals urgently seeking viable resolutions to their financial predicaments,” he said.

Bridgland said conversations with industry insiders, including lenders and brokers, reveal a generally positive sentiment regarding business prospects for the year ahead.

While optimism abounds, he added that there is acknowledgment that anticipated activity levels may not reach the zenith witnessed in 2022.

“This tempered outlook is attributed chiefly to the prevailing landscape of higher interest rates and more conservative loan-to-value ratios,” Bridgland said.

Looking at the year ahead, he believes that further strides in innovation are expected, particularly from industry stalwarts such as Legal & General and Livemore.

However, Bridgland added that the persistent challenge of loan-to-value ratios remains a focal point.

“With approximately £90-95 billion of interest-only mortgages accounting for up to 50% loan-to-value (LTV), and a comparable sum exceeding this threshold, the issue of maintaining appropriate balance and risk management looms large,” he said.

Finding viable solutions to bridge this gap, Bridgland said, will be imperative for the sustainable growth and resilience of the equity release market moving forward.

How is the equity release market performing so far in 2024? Let us know in the comment section below.