Are brokers missing a trick with equity release?

New analysis from the Equity Release Council has found that recovering house prices in the first half of 2024 have boosted the total value of the nation’s property equity to an unprecedented £5.7 trillion.

It’s urging financial advisers to highlight to clients the part that property wealth can play in resolving the challenges they face, at a time when older households anticipate losing access to winter fuel payments due to the government grappling with public finances.

Responding to the findings, brokers and lenders have told Mortgage Introducer that they believe that advisers could further boost their business by getting up to speed with equity release.

The Equity Release Council points to government data suggesting 76% of over-55s own their own home, with an average £321,213 of equity in a property. This equates to almost 10x the average pensioner couple’s annual net income of £38,168, it says.

It’s calling on the government to set out its vision for property wealth in later life funding.

“Whether it is boosting income, managing unsecured debt, paying for care or helping to get family members on to the property ladder, there is a huge amount of potential tied up in bricks and mortar,” declared Jim Boyd, CEO of the Equity Release Council.

“Financial advisers need to ensure that when they are speaking to their clients, the role of property is discussed – even if the right approach is ultimately to look at other options. We need to encourage informed choices.”

Boyd (pictured left) added: “Our findings make it crystal clear that your prospects of living comfortably in retirement will rest on firmer foundations if you own your own home and include property wealth in your financial plans.”

Will the equity release market grow?

Gerard Boon, managing director at Boon Brokers, said he believes the equity release market will significantly grow in size, once interest rates fall to an acceptable level. But he conceded that advisers should be better educated.

“Having spoken with many brokers, sadly, I do not believe that the market is sufficiently educated in later-life products,” said Boon (pictured second from left). “We receive enquiries from many clients who have been told by other advisers that there are no viable financial options for them, yet we then discover that equity release has not been discussed.

“Many brokers still shudder when the term equity release is mentioned in conversation, due to the product’s poor reputation in the past. I believe that the product is now one of the most flexible and safe on the market. Even though it is often the most expensive option due to the high initial fixed interest rate and compounding interest element of the loan, it may still be the most suitable product for clients.”

Read next: The UK's most expensive property postcodes

Family Building Society’s head of intermediary sales, Darren Deacon, said equity release presents ‘significant opportunities’ for the mortgage industry, and he urged brokers to become better educated about the market.

“When older borrowers consider releasing equity to gift to family members, it can lead to additional business if those family members require mortgages,” suggested Deacon (pictured second from right). “Brokers could benefit from additional education on these alternative options to better serve their clients.

“Equity release frequently arises in discussions with older customers, as they often seek to enhance their quality of life in ways different from previous generations. Many have accumulated significant equity in their properties and are interested in using it to improve their lives or assist family members.”

Read more: What’s missing with later life lending?

How much of a solution is equity release for older clients?

Independent mortgage and protection adviser Joela Jenvey, from Nurture FS, meanwhile reasoned that equity release presents ‘an interesting concept’ for older clients who have worked to pay off their mortgage debt to ensure they and their families are secure in later life.

“The idea of taking another mortgage when they finally own their home is not an obvious solution to most,” noted Jenvey (pictured right). “Equity release is a specialist product dealing with vulnerable clients and not every adviser’s cup of tea.  Advisers are required to take a completely different approach.  It is likely to be a longer process, where you must be patient and understand all aspects of the clients’ financial circumstances.”

Jenvey said she is seeing an increase of clients who are caught in between mainstream residential mortgage and equity release criteria.

“I would like to see more innovation in RIO (retirement interest only) and later life mortgages to service the gap,” she said. “There are opportunities for qualified brokers firms who are set up to service older, equity-rich customers.”

But she cautioned: “Recommending an equity release mortgage should be the last resort when you have guided the client to explore and they have exhausted all other options to meet their needs. Considerations must be made as to whether the client would be at a disadvantage due to losing benefits or affecting their tax position, or whether they can qualify for help from government grants.”

Mark Gregory, founder and CEO of Equity Release Group – which supports advisers and customers, and whose brands include the comparison site Equity Release Supermarket - said the business had seen an uplift in August of 32% in enquiries, compared to July.

“We believe that some of this increase is down to retirees exploring their options after years of rising costs and the impending tax changes that have been widely reported in recent weeks,” Gregory said. “With nervousness about the upcoming autumn statement, and the implications it may have on those planning their retirement, many people are looking for alternative ways to help fund their retirement plans.”