SPECIAL FEATURE: Time has come for ER
The next big thing? It’s time will come? Underlying demand to increase business volumes? All these comments and questions have been raised about the equity release market and, some might say, at last it appears the sector now has a more than reasonable chance of fulfilling its potential. It’s not been an easy road, nor is it likely to be, however one might think that the, often divergent, drivers that should increase equity release activity are finally doing just that.
Latest lending volumes from the Equity Release Council appear to show strong progress in that regard with an 11% jump for H1 2015 compared to H1 2014 (£710m against £641m). That being the case we might also anticipate 2015 getting, at the very least, close to the £1.5bn mark which given we only broke £1bn again a couple of years ago shows a very positive trend.
So, why might this be? Well, according to the council’s figures, it is the 65-74 age group which is driving this with a 5% increase in customer numbers in this age bracket compared to a 2% rise across all customers. Now, I’ve seen this particular age group referred to as ‘older homeowners’ and I suppose in the great scheme of things that is technically correct. However, when it comes to equity release, these are the fundamental target group for advisers and providers and there is nothing strange about the fact that these customers took out 58% of all plans in the first six months of the year.
There is clearly a growing need here – perhaps fuelled by reaching a ‘traditional’ State retirement age and bringing with them ongoing debt, a drive to provide a living inheritance to kids and grandkids, a need to supplement the retirement income already received, the list goes on. Understandably there has been a great deal of focus on the just-past 50 age range recently given that pension freedoms are available from this point, however in terms of equity release it has tended to be those individuals in their mid-60s who are more warm to the equity release idea, and more inclined to go ahead with it.
Of course we are in the very early days of the pensions revolution and there may be a shift going forward, but I tend to think that those accessing their pension will do so first before perhaps then looking at the equity release option. Certainly, this data gives advisers a very clear idea of the demographic perhaps most open to an equity release solution and marketing at this age group may bring about very positive results.
The growing degree of positivity around the sector is also welcome. To hear Robert Sinclair at AMI talking about the potential for a £5bn equity release market by the end of the decade provides a feel-good factor to those active practitioners and maybe also encourages those advisers currently not active but who may be looking to diversify their businesses. The good news for those in this boat is that the sector has a number of distributors like ourselves who have the specialist knowledge, support structure and resources to allow advisers to hit the ground running.