Chris Prior is manager, sales and distribution, at Bridgewater Equity Release
October has so far been a rather positive month for the equity release market if you discount some of the mainstream media criticism which afflicts the sector on a regular basis. Before I begin on the positives it strikes me that we as an industry have a further battle to fight with regards to the reasons why our customers might take out an equity release plan.
Essentially while advisers and providers will always ask why a customer wants to release money from their home – indeed the whole advice process is predicated on the reasons why – it is completely up to them what they do with their money. Clearly at the front end of any advice/sales process, if a customer came to an adviser and suggests they need extra cash to purchase Christmas presents for their family I would suspect there would be an exploration of all other options – not just equity release - available to that customer. However if, having done this, and with the client being in full possession of the facts about equity release and their responsibilities then they wish to go ahead with a plan for this reason, then that is up to them. As long as the adviser and provider have gone through the process compliantly and can prove all points of that process, then to reiterate the customer decides how they use the money.
Each and every one of us will have a view on what we believe is an appropriate use for cash released via equity release. Some in the media clearly think spending the money on Christmas presents is not appropriate while paying debt off, funding long-term care or using it for house renovations is. Others will not believe the money should be used for holidays or purchasing a new car. But they are not the customer and it would be worrying if we began to look at some sort of regulatory solution – which some appear to be calling for – that determines how the money can or can’t be spent. There is no great media call for such an approach for those borrowers who release money via a remortgage so why should it be appropriate for equity release customers. This is an issue of choice, and ensuring appropriate advice and solutions are offered to meet the needs of that customer.
Perhaps a more positive story emanating from the sector this month was around the equity release market in general and the business increases that have been taking place. The latest figures from the Equity Release Council for quarter three this year showed that the total value of equity release plans taken out in that three-month period was the highest since way back in Q3 2008 – a quite pivotal time in history given that all types of lending-related activity fell quite dramatically after this due to the Credit Crunch/global recession.
The value of all equity release plans hit the £284.1m mark in quarter three – a considerable increase of 15% over quarter two this year and, quite remarkably, the biggest increase in nine years. Again customer numbers also improved significantly – up to 4,975, the most seen since quarter two 2009. There is also further good news for the equity release advisory sector with 97% of all plans sold during the quarter conducted via advisers. It would seem that the message about the overwhelming need for advice in our sector has hit home and that individuals are availing themselves of the advisory sector in order to secure peace of mind and professional recommendations.
As a provider that deals exclusively via the advice channel this is a really encouraging statistic and one hopes it continues to creep up over the months and years ahead. While there remain ongoing challenges to overcome, we certainly believe equity release will become an even more important option for many people near or in retirement and specialist advice is absolutely crucial in supporting and helping all those customers who may benefit from utilising a plan.
