Building societies have come a long way over the past few years and can no longer be seen as offering just savings and mortgage products.
There are currently 59 building societies with combined total assets of £325 billion. Of these, I cannot name a single one who simply adheres to the traditional stereotype of a provider of deposit accounts and mortgage lender only.
Research by the Building Societies Association (BSA) for the year ending 2006 showed that there were at least 16 other types of financial services product offered by mutuals, the most popular being household and contents insurance, which 95 per cent of societies offer.
In addition, 89 per cent provide unemployment cover, 75 per cent offer critical illness cover and 65 per cent provide term assurance.
Aside from the popular insurance services, 40 per cent offered unsecured loans, 38 per cent provided secured loans and 30 per cent offered credit cards.
Alongside from the raft of products identified by the BSA in 2006, there have been many more innovations by building societies over the past year alone.
Societies have built on their existing knowledge base to launch of a wide selection of intermediary mortgage brands including Godiva from Coventry Building Society, Astra from Norwich & Peterborough, and Salt from Derbyshire Building Society.
A significant market
One area that a number of building societies have recently diversified into is equity release. The equity release market has grown significantly in recent years, according to Safe Home Income Plans (SHIP).
At the end of 2007 the total number of equity release plans sold by SHIP members is expected to reach £1.279 billion, so it makes sense for societies to enter this growing market.
An overlook of the nation also shows that equity release will be in greater demand over the coming years. The nation, has an increasing population over 60 years of age, and within this demographic there are certain economic sub-sections.
There are the ‘asset-rich, cash-poor’ consumers who have experienced a large increase in the value of their property, yet struggle each month to make ends meet.
Then there are the consumers who have provided for their pension and have a large amount of equity tied up in their home. Some of these consumers are looking to maintain a certain lifestyle and although they have provided adequately for their basic needs, would still appreciate extra money to maintain the lifestyle they had while working.
Dictated by the consumer
Equity release schemes have become a feasible option for these individuals and interest is growing. However the equity release market, like any other, must be dictated by the needs of the consumer.
With the full regulation of home reversions by the Financial Services Authority last April, and the new ‘Treating Customers Fairly’ deadline announced recently, the need for good quality advice is paramount.
Only by following a set procedure for offering good advice can the complexities of equity release schemes dissipate and the importance of consumers’ individual needs comes to the fore.
Not for everyone
The majority of today’s 60-plus consumers have many new and difficult situations to face that were not a problem to their parents and grandparents.
They face lower interest rates for savings accounts, increases in taxation and, of course, the decline of the state and private pension. This has meant that consumers are looking at different and more varied schemes in order to finance their later years.
But, it is important to understand equity release is not for all of these consumers and that there may be different routes that could be taken that would be better suited. A customer may believe a lifetime mortgage is the answer to their economic needs, yet this may be wholly unsuitable for them. It is then the duty of the intermediary advising them to inform them that this is the case.
The best way to grow the equity release market is by offering a service, products and advice that is trustworthy and offers security.
Building societies have long been applauded for the trust their members place in them, and this gives them a great opportunity to expand the market as they are able to help shake off its tarnished image.
