An increasing amount of equity release customers are paying off interest with scheduled payments,Stuart Wilson, B2B channel marketing director at more 2 life, has said.
An increasing amount of equity release customers are paying off interest with scheduled payments,Stuart Wilson, B2B channel marketing director at more 2 life, has said.
He added thatlump sum payments have made a bit of a comeback and flexible capital repayments have been having a huge impact in this market.
Wilson said:“We’ve seen some other recent innovations in the market where lenders are starting to recognise the needs and desires of clients to not just make voluntary payments, but to make scheduled interest payments.
“These are interest service solutions, paying the interest down on the loan so it’s keeping the balance completely level. These are increasingly popular options for clients.”
Wilsonadded thathe’s seen a trendtowardsbetterqualitylump sum products coming onto the market with good LTVs, keener rates and great features.
Heattributed increased demand for lump sum payments to beingslightly cheaper than drawdown options,and high net worth individuals who have valuable homes worth £1m or morethatonlywantto take out small lump sum payments like £20,000.
Dean Mirfin, director at Key Retirement, said that he’s seen the popularity of drawdown in the marketplace increase as a percentage.
He added: “Drawdown has been the dominant part, typically around 60% to 70% of the market, for quite a few years and so it’s just easier to notice innovation in that space.”
He said that the main thing he’s seen is more product features such as voluntary payments and downsizing protection. This was released around last year and helps customers with a lifetime mortgage loan move to another house, protecting them from early repayment charges.
Mirfin said: “I would say that’s been the biggest introduction in the last few years, influencing more customers than ever.
“It’s one of the newer features that’s come to market and when we engage with customers, we’ve found they have become very relevant and popular because a lot of people want to move home at some point.”
The latest product innovation is retirement interest-only mortgages which four providers have launchedinto.Mirfin believed that more will follow but only time will tell if it’s a success.
He added: “It’s still early days. We don’t know the impact of the different affordability assessments lenders have and it’ll be interesting to see how different lenders approach that.
“As more products come out, if the uptake is good, we’ll start to see more competition in that space.”
With all this competition, Wilson said the aim at more 2 life is to help grow the market and climb from third largest to eventually become the biggest lender in this sector.
He said: “I think you’ll see our market share rise from Q1 on about 13% of the market. We’ve leapt forward driven by the new maximum choice product and our flexi choice product, which is very dominant in that low interest rate part of the market so we’ll see more going forward.”
Equity release is a growing market, breaking records each year for the last few years with 2017 setting a record of £3bnin equity released by house owners.
Wilson predicted that 2018 will be another record year, growing around 25% and setting a record of around £3.7bn or £3.8bn, by the end of 2018.
He added: “Pension freedoms have made people think of their house as more of an asset and I think housing wealth will become the mainstream option for clients.”
