2015 was a hugely successful year for equity release, with more records set to be broken in 2016, writes Nigel Waterson, chairman of the Equity Release Council
Market activity continues to strengthen with total equity release lending in the first half of 2015 reaching a record £710m – up 11 percent from the same period in 2014. The third quarter brought the biggest quarterly rise for 11 years and a record quarterly lending figure of £452.6m, as over-55 homeowners withdrew £5m of housing wealth a day.
Competition was boosted by the entrance of Legal & General. The genuine prospect of more new providers, products and funding in 2016 will continue to enhance product innovation, evidenced in recent years by the emergence of products allowing interest payments to be made in the early years of a loan.
With such progress in 2015, the equity release market will continue to focus on increasing awareness of equity release and extending its reach as a viable financial option for later life. Recent findings from the Equity Release Council highlighted that older homeowners underestimate the value of their home by up to £90,000: more than three times the value of the average defined contribution pension pot. As older people decide how best to support themselves in retirement, housing wealth should be on everyone’s checklist.
We are at an important moment as we enter 2016 for the future of retirement funding. The UK population is ageing and continuing reforms, such as the pension freedoms, are giving people more options on how best to manage their finances in later life. The mainstream mortgage sector has struggled with lending to older customers.
There is a growing appetite for a collaborative approach across financial services to deliver effective solutions that manage the challenge an ageing population brings. The experience and expertise of equity release professionals in helping older borrowers will play a vital role. The Council will continue to engage with government and regulators to ensure their voices are heard and used to inform solutions that deliver real benefits to consumers.
As well as reviewing mortgage market competition and retirement lending, the publication of the FCA’s Financial Advice Market Review in 2016 will also be an opportunity to ensure that people nearing retirement can easily access appropriate guidance and advice. It is vital that people get the help they need to consider the full range of relevant issues important to them such as retirement funding, paying for care, home adaptations or helping family.
As we work to ensure equity release is understood by more people, we will also not falter in our efforts to ensure equity release customers benefit from the highest standards of advice and consumer safeguards, underpinned by appropriate regulation and The Council’s own Statement of Principles. Such standards are crucial to ensuring the positive outcomes enjoyed by the vast majority of customers. No wonder FOS receives so few complaints about equity release, and upholds a minority.
2016 will also mark 25 years since our organisation was born. While we will all take a moment to reflect on progress since then, we will certainly not be resting on our laurels as we strive to build on recent momentum within the market.