Alice Watson is product and communications manager at Retirement Advantage Equity Release
The Equity Release Council recently announced the highest first quarter lending figures on record, with the total value of loans up 21% year-on-year to £394m. The news couldn’t have been timelier, coinciding with the 25th anniversary of the sector’s first industry standards.
Despite this surging demand, our latest research shows that less than 1% of the potential equity in the UK, estimated at £377bn in Q1 2016, has been used.
Clearly, there is substantial untapped potential to allow retires to access the wealth stored in their properties. For many, property will represent their most valuable asset, far outstripping the value of cash savings, pension pots or equity holdings.
That’s why the industry has been swift to welcome the FCA’s decision to remove affordability assessments for hybrid lifetime mortgages. This additional step in the application process was seen by many as an unintended consequence of the Mortgage Market Review (MMR), creating a barrier for the majority of over 55s who are asset rich but cash poor.
We’ve been in conversation with the FCA for some time about removing these assessments, and it’s great to see that the regulator has responded to calls for change from the industry. The move will go some way to ensuring that equity release fulfils its potential across the country, paving the way for product innovations and new entrants to the market. This is great news for providers and consumers alike.
Retirement Advantage was first to truly embrace the affordability rule change. We recently announced a number of product modifications, removing the need for affordability assessments to be completed as part of the application process. The changes combine greater ease for adviser and consumer with the stringent safeguards equity release customers have rightly come to expect.
Widespread product innovation has of course long been underway across the equity release industry. The latest research from Moneyfacts shows that there are now more than 70 different lifetime mortgage deals available to retirees. We’ve also seen a number of new entrants to the market recently, which always spurs innovation.
The equity release market is going from strength to strength. What’s required now is further proactivity on the part of regulators to create the necessary space for provider innovation and customer accessibility. In doing so, we will increasingly realise the massive potential of the UK equity release market.
Our research shows that this potential is growing throughout the country, and is actually increasing faster in regions outside the equity release heartlands of London and the South East.
Without doubt, the rapid maturity of the equity release market presents an opportunity for advisers right across the UK.