Marketing No Comments

Equity release activity soared before the lockdown

There was £1.06bn of equity release activity in Q1 before lockdown took effect, data from the Equity Release Council shows.

This represents a rise of 14% from the £936m recorded over the same period last year.

It was driven by strong consumer confidence in early 2020 after the general election.

David Burrowes, chairman of the Equity Release Council, said: “These figures reflect the return of consumer confidence to the broader UK economy at the start of the year, after December’s election promised to restore certainty before coronavirus took hold.

“Pent-up demand from 2019 meant homeowners continued to look to property wealth in growing numbers for later life finance in January and February, backed by strong consumer protections and increasing product flexibility.”

There were 11,079 plans agreed in Q1, the largest total in the first quarter since records began in 1991.

Drawdown lifetime mortgages made up 57% of plans taken out, with lump sum mortgages accounting for 43%.

Claire Singleton, CEO of Legal & General Home Finance, said: “The current Covid-19 environment clearly presents challenges, and it’s currently too early to gauge the impact it will have on demand.

“However, we believe the fundamental drivers of growth remain, and we expect the upward trajectory to continue. Indeed, unlike many other areas of the housing market, equity release has not stalled and the industry has adapted well to the challenges of social distancing and remote working.

“However, it must be made clear that equity release is not an ‘immediate needs’ product and therefore requires careful consideration. Much has changed since the start of the year, making it even more important to pause, take advice and avoid reacting hastily to financial concerns.”

Jonathan Barrett, partnerships director at digital retirement solutions fintech, ABAKA said: “While the equity release market is now facing the challenges posed by coronavirus and the impact of lockdown, there is a clearly still pent up demand from consumers for lifetime mortgages and other later life lending products.

“Advisers and providers will all need to be ready to manage that demand from consumers when we come to the end of this crisis, but the advice gap the sector is facing could prove to be a bottleneck.”

He added: “Recent rule updates from the Equity Release Council which now allow for remote advice mean advisers will be having to adapt more quickly to the digital world.

“Tools like AI-powered chatbots can also help support this transition by answering questions from potential customers, so that advisers can focus on supporting their clients through the equity release journey.”

BY RYAN BEMBRIDGE

Source: Property Wire

Marketing No Comments

Equity release growth halted in 2019

The equity release market’s rapid growth came to a halt in 2019, with the total staying flat compared to 2018.

There was £3.92bn of housing equity withdrawn, down slightly from £3.94bn in 2018, figures from trade body the Equity Release Council show.

However, the market has still grown four-fold in the last decade, with the amount withdrawn rising from £945.97m in 2009.

David Burrowes, chairman of the Equity Release Council, said: “After a period of steady growth, the market has reached a point of consolidation in 2019 with lending volumes in line with 2018.

“The sector enters 2020 in a strong position with updated standards and a greater number of diverse members signed up than ever before.”

Despite the slowdown the final quarter of 2019 was one of the busiest quarters on record, with more than £1bn released.

Alice Watson, head of marketing, insurance, Canada Life, expects the equity release market to continue growing.

She said: “2019 was a difficult year for most parts of the UK economy and that’s reflected in today’s ERC stats.

“But the start of a new decade could herald further expansion for the equity release market, if it builds on the successful foundations of the previous decade: strong customer safeguards, adviser support and a relentless focus on giving customers the flexibility and certainty they want.

“There is still much work to be done – customer misconceptions and negative perceptions of equity release continue to hold back the industry. The industry must work together to overcome these obstacles to growth.

“The strong finish to 2019 is a positive sign for the industry and coincided with a time when wider economic trends indicated a more positive picture for the UK economy. Should these trends persist, and the industry continue to offer innovative products, the market is all but certain to return to expansion in 2020 and beyond.”

BY RYAN BEMBRIDGE

Source: Property Wire

Marketing No Comments

Strong growth in lending by equity release firms and other specialist lenders

There was strong growth in lending by equity release firms and other specialist mortgage lenders last year, as the demand for later life borrowing increases, according to trade association UK Finance.

In a blog on its website, it said gross mortgage lending totalled £268 billion last year, up 3% on 2017.

Patterns of borrower incomes have become more complicated, it said, partly driven by a growth in people being self-employed as well as an ageing population with more people working for longer.

The blog said: “In this changing environment, lenders who have more bespoke, often manual, underwriting processes are well placed to help these customers.”

UK Finance’s figures show lending by equity release specialists increased by £800 million between 2017 and 2018.

And its figures relating to older borrowers show 78,514 new residential loans were made to borrowers aged over 55 last year, with 42,866 new equity release loans made to this age group.

Equity release covers a range of products which allow people to access the equity – or money – tied up in their home.

But while an immediate cash boost could be useful in some situations, there are important longer-term factors to consider.

For example, borrowers may find they might not be able to rely on their property for money needed in retirement, or that they will have less than they wanted to pass on as an inheritance. Borrowers may want to take independent financial advice when weighing up their options.

UK Finance said that, in a sign of growing competition for borrowers’ business generally, 70 lenders each provided more than £50 million of mortgage lending to home owners and landlords in 2018, up from 65 lenders the year before.

Lloyds Banking Group remained the UK’s biggest mortgage lender last year, followed by Nationwide Building Society in second place.

The blog, written by UK Finance analyst Callum Bilbe said: “Lenders have seen a higher demand for mortgages from older borrowers in the last few years, extending their maximum age criteria and adapting underwriting for those whose income in later life is more complex.

“This has facilitated a competitive and expanding mainstream later life lending market.

“This is also evident within the equity release mortgage market, where we continue to see strong growth. This is driven in part by investment from firms in the life and pensions space, for whom the long-term income stream from equity release mortgages aligns well with their liabilities.”

By Vicky Shaw

Source: Yahoo Finance UK