Bowmore Financial Planning lists two probable reasons
The market for equity release mortgages among individuals aged 60 and above has seen a significant decline over the past year, with sales values dropping by 48%, according to Bowmore Financial Planning.
The decrease from £5.2 billion in the 2021-22 period to £2.7 billion in 2022-23 has brought the value of equity release mortgages to its lowest point in five years, with figures previously recorded at £2.9 billion in 2018-19.
The downturn in equity release mortgage sales has been attributed to rising interest rates, which have increased the costs associated with these financial products, reducing their appeal to potential customers.
Additionally, a recent FCA review into later life mortgages highlighted concerns over the quality of advice and information provided by firms, revealing that poor guidance and misleading information were prevalent. This scrutiny led to the amendment or removal of almost 400 promotions found to be misleading.
Mark Incledon (pictured), chief executive of Bowmore Financial Planning, expressed concern over the dramatic fall in sales, noting that equity release mortgages have been a crucial financial tool for many families seeking to fund retirement, education for grandchildren, or needing to access emergency funds.
“The rise in interest rates on this class of mortgages has made this route less affordable and less attractive,” Incledon said. “Many elderly homeowners have the majority of their wealth tied up in their homes – there are few alternatives for freeing up the cash they need.
“The recent FCA report was quite damning – and may well have exacerbated the slowdown in sales of equity release mortgages.
“With interest rates expected to come down over the next year, we should see lifetime mortgage providers offer more generous deals. If that happens, then lifetime mortgage sales should recover. If the trend continues, however, this could be very problematic for elderly borrowers with bills to pay.”
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