Defaqto believe equity release is entering a crucial stage in its development and will assume a greater role in retirement planning over the coming years as pensioners come up against under-funded pensions, low annuity rates, debt and demographic issues.
The current trend for interest only mortgages without any apparent capital repayment will only help to exacerbate this situation. With the money these pensioners have tied up in their properties, it will become the obvious solution to a problem that is rapidly gaining momentum.
However Defaqto believe that consumer choice and confidence in equity release products is still limited by a lack of household names entering into the market.
David Black, head of banking at Defaqto, says: “A number of factors are coming together which will make equity release an increasingly sought-after retirement solution for many people. In particular, growing levels of pensioner debt combined with under-funded pensions and low annuity rates mean that equity release provides a genuine way forward for those struggling in retirement.
“Although it remains essential that people explore alternatives to equity release as well as its possible implications; equity release will become an increasingly relevant option in future retirement planning. It clearly won’t suit everyone but it will increasingly provide a solution for many people.”
Responding to this, Mark Roberts, head of faculty of financial regulation at the ifs School of Finance says: “The Defaqto report again highlights the fact this a growing area of business for advisers. A greater focus on equity release could therefore be a good business decision to take.
“As increasing numbers of consumers consider purchasing an equity release product demand for advice will obviously grow. To meet this need, increasing numbers of financial and mortgage advisers will need to gain an appropriate qualification.”
