Experts discuss trends in the equity release space
You do not have to be a personal finance expert to know everyone, no matter their walk of life, is feeling the pinch on their disposable income right now.
However, experts believe the rate of recovery in the equity release market after the mini budget last year is a strong demonstration of its resilience, providing customers a route to securing additional income if they need it.
“Even with the current rate environment, the sector still has more products available now than it did at the end of last year,” said Kay Westgarth (pictured), sales director at Standard Life Home Finance.
Mortgage Introducer has spoken with several experts in the field to uncover current market trends and the direction of the sector as a whole.
Equity release market trends
Historically, Westgarth said uncertain times have often inspired innovation in the financial services arena. “This year has certainly not been without its challenges, including the recent rate instability, so I do think the market will evolve,” she said.
That said, Westgarth added that the short-term focus is on ensuring Consumer Duty obligations are met, and that as a lender it is supportive to advisers and customers as they navigate the current market.
“Equity release is an important part of the conversation for older homeowners to have with their advisers, as they look for ways to enjoy better retirements and to support younger generations with robust financial gifting,” Westgarth said.
As with the wider market, it is fair to say that the later life lending sector has seen some turbulence recently, but Ben Waugh, managing director at more2life, said nothing on the scale of ‘Trussonomics’.
“Having bounced back from that September bombshell, lessons have been learned, and the equity release market is now ideally placed to support customers as well as advisers as they navigate the current uncertainty,” he said.
Arguably one of the biggest challenges in the market, Waugh said, is that people are still thinking back to the sub-4% rates we saw only 12-months ago. Waugh said higher rates are the new normal, but with equity release products boasting a wide range of flexible features, he believes customers still have a good range of options to choose from.
Ultimately, Waugh said the focus needs to be on finding older homeowners the best outcome for their individual circumstances, based on the current market, as well as their needs and wants.
“It may be taking out equity release, using a RIO or working longer, but we do not have a crystal ball, so as we have seen over the last few months, waiting for rates to fall does not necessarily pay,” he said.
Direction of the equity release market
Stuart Wilson, academy chairman at Air, said since the September mini budget, there has been a return to customers focusing on pressing needs such as the repayment of mortgages, boosting income, and the management of debts.
“The pent-up discretionary spending which had started to be released in early 2022 has once again been put on the backburner by many older homeowners,” Wilson said.
Although interest rates in the equity release market are not linked to the Bank of England base rate but instead more closely track gilts, Wilson said the current economic uncertainty has boosted yields on these products. He has seen a corresponding increase in rates, and while loan-to-values (LTVs) have improved since the market shock last year, he added that they have not quite reached previous levels.
“Given the current uncertainty in the UK property market as borrowers digest the implications of further base rate increases designed to manage inflation, lenders are being understandably cautious,” he said.
That said, having spoken to advisers and the firm’s ambassadors, Wilson said there is a strong belief that equity release has a big role to play for older homeowners and that any uncertainty we are seeing is short-term.
“Fundamentally, the drivers of this market are strong and as people become accustomed to the new normal and take advantage of the flexibilities offered by modern later-life lending products, we will see volumes rise,” he said.
What market trends have you seen in the equity release sector? Let us know in the comment section below.
