Equity Release lending could reach £2.5bn in 2016

Ryan Bembridge

January 7, 2016

house price index

Equity release lending could reach £2.5bn in 2016 as the Equity Release Council continues to push the industry’s agenda in government.

Bower Retirement’s chief corporate officer Andrea Rozario made the prediction while Age Partnership’s equity release technical manager Simon Chalk made the more modest guesstimate of at least £2bn. Later Key Retirement’s technical director Dean Mirfin opted for £2.2bn.

In 2014 equity release lending stood at £1.4bn. The 2015 figure has yet to be released, but Chalk reckoned it will sit between £1.7 and £1.8bn.

In September last year Association of Mortgage Intermediaries chief executive Robert Sinclair forecasted the equity release market to be worth £5bn per annum by 2020.

Rozario said: “Equity release lending could reach £2.5bn this year, while reaching £5bn in five years is not outside the realms of possibility.”

Chalk said: “In 2015 lending will likely be £1.7bn or £1.8bn. I don’t think we will breach the £2bn barrier but this year we will.

“I wish he [Sinclair] was right; I don’t think he will be.

“A normalised market once people understand and accept equity release could be £7-10bn per annum.”

According to Chalk “historical baggage” is still weighing down the equity release industry, which is simultaneously accused of being high risk and too expensive.

Products typically cost more than in the mainstream mortgage market (5.3% and above) due to built in fail safe’s such as a no negative equity guarantee.

With the FCA currently reviewing mortgage competition and lending into retirement Chalk and Rozario hoped the value of later life products will get more attention.

Equity Release Council chairman Nigel Waterson called this year a “pivotal one” for the industry.

He said: “There are important decisions ahead and we are pushing for a joined up approach across industry, regulators and government to support this.

“But after years of predictions, there are clear signs of momentum building in favour of equity release playing a bigger role in funding retirement.”

Treasury responsibility

In October 2015 the Equity Release Council called for the Treasury to take responsibility for the equity release market and this was echoed by Chalk and Rozario.

Waterson said: “The Council has been vocal in calling for this change, which formed part of seven key recommendations we presented to politicians and policymakers in October 2015.

“It is important that government policy does more to consider equity release – not just to promote awareness, but also to consider the long-term impact of decisions relating to tax and regulation which may affect equity release lending.

“There are many areas where housing wealth can help provide a solution to challenges faced by society, from boosting retirement incomes to paying for homecare.”

Currently the buck is being passed between the Department of Housing, the Department of Health and the Department for Work and Pensions as well as local authorities and social services.

Spreading the word regarding the value of equity release could pay for itself by encouraging people to draw on valuable assets rather than fall back on the state, as Chalk explained.  “The government has to allocate a certain amount of budget and resource to help people look at their options,” he added.

“It’s logical to make housing wealth part of this as a valuable asset, just as state pensions, auto-enrolment and other incentivise like pensions freedoms in the budget encouraged people to save rather than falling back on the nation for support.”

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