As equity release market grows, clarity for customers is paramount
Equity release and later life lending have become big business.
The UK’s later life lending market today is worth almost £154 billion, with roughly £55 billion worth of new lending and product switching taking place in 2021 alone, according to research by AKG Financial Analytics.
And demand is expected to grow substantially in the next two to five years.
Meanwhile, the equity release market, which includes lifetime mortgages and home reversion plans, has continued to expand following a return to growth last year, with almost 23,400 customers withdrawing equity from their property during the first quarter, up by 21% over last year, research from the Equity Release Council (ERC) has shown.
Separate data by Cebr predicts that total retirement spending funded by equity release could top £4 billion this year, up by £1 billion from 2021.
Moreover, the ‘Equity Economy Report’ from Legal & General has concluded that the total amount of equity released from property could double by 2030 to more than £12 billion.
In any case, the share of property wealth held by the over 65s has been increasing over the last decade or more.
Read more: Air Mortgage Club: 90% of advisers see need for later life lending
And while the equity release and later life lending markets continue to grow, advisers, who are at the vanguard, have become increasingly aware of the importance of data provision and education.
Hoping to exploit the gap in the market by supporting advisers operating in the space is Stuart Wilson (pictured), CEO of later life lending platform, Air.
The firm’s aim is simple enough. “Our job is to basically supply the adviser with as many leading-edge tools with which to deliver a better outcome to consumers,” he said.
Speaking to Mortgage Introducer, Wilson explained the importance of providing clarity for advisers, especially as their consumers are often stumped when it comes to choosing the right product.
“If you are an adviser dealing with an older consumer over the age of 55, we want you to make sure that all alternative product solutions are delivered to them. Our job is to bring all of those together. We negotiate with them, and we help them design, distribute and market the products.”
Air provides the software that presents the products to advisers, who in turn compare them for customers to get the best deals.
The Gloucester-based firm operates three platforms, one of which – Air Academy, an interactive training programme for advisers that’s accredited by the London Institute of Banking and Finance and aligned to the Equity Release Council’s competency framework, was relaunched late in June.
Air Club, a more traditional physical shop stacked with later life lending products, and its high-tech sibling, Air Sourcing, which offers an Amazon-like push-button virtual experience, make up the rest of the group’s triumvirate.
Asked why later life lending required such as a special focus, he pointed out that the typical consumer was invariably less accustomed to dealing with technology than a person in their 30s.
“There’s a lot more manual process needed. You need to combine and merge technology with humanity - you can’t just dump it all straight into the tech world,” he said.
“But you’ve also got things like vulnerability. Although I’ve always fought very hard against this assumption that an older consumer equals a vulnerable customer, it can make you more potentially vulnerable.”
Read more: Equity release funds over £3 billion of retiree domestic spending
He stressed the importance of having an adviser who was tuned in to a customer’s particular needs and circumstances.
“That customer has got a whole raft of different emotional scenarios, different health scenarios, different demographic pressures. You cannot just simply follow the customer’s lead and say, ‘OK, here’s a quick fix solution - borrow £30,000’, because that could be digging them out of a hole and putting them into an even bigger one - there’s got to be a lot of credit counselling.”
Just as significant from Air’s viewpoint is the average age of advisers - between late 50s and early 60s – which suggests they could also brush up on their tech skills by signing up to Air’s training programme.
But the other might be to tackle some of the misconceptions surrounding later life lending, which Wilson believes are still rife in the industry.
“The biggest one is that equity release equals increasing debt. That hasn’t been the case for 20 years. Customers choose if their circumstances allow them to decide which products they want - only the consumer ultimately chooses to increase the debt.
“But you still read articles constantly where there’s this implied assumption of ‘oh, well, of course equity release is bad because you end up owing loads more than you borrowed’,” he said. “You don’t.”
