Unlocking lifetime mortgages for the retiring generation
Steve Ellis (pictured), managing director of Legal & General Home Finance
When the FCA recently decided to shelve plans for a new equity release qualification, we heard of disappointment amongst providers in the retirement lending sector. Lenders bemoaned that this was somehow a missed opportunity to expand distribution – and could hinder the market from reaching its full potential.
However, at Legal & General we took a different stance. Indeed, we think that the FCA was right to decide a new qualification wasn’t needed.
There were good intentions behind the idea of a standalone qualification, hoping to encourage more advisers to enter the space to meet the growing demand from consumers. However, launching a new qualification was never going to be the panacea that propelled the lifetime mortgage market to reach its full potential. For that to happen, we need to look at what we have now. We need to unlock existing distribution opportunities.
There are more than enough brokers who already hold a certificate in regulated equity release, but don’t talk to their clients about releasing equity. In the past, advisers often undertook the certificate in addition to their CeMAP, but a significant number of them actively choose not to advise on these products, and its these advisers that – as an industry – we need to be speaking to.
Clearly, not all of these advisers feel confident, willing or able to advise on lifetime mortgages. Is that the result of legacy perceptions about the equity release market? Because they are not aware of the new products offered by newer lenders to the sector, such as Legal & General? Or do they feel ill-equipped to have conversations about borrowing in retirement with their clients?
Our market already has the capacity to meet the growing demand from consumers. If we can encourage these advisers to enter the lifetime mortgage market and advise their clients on releasing equity, amongst other options for retirement, we will have all of the distribution we need for the foreseeable future
Quarter by quarter, the lifetime mortgage market has enjoyed record growth, reaching £2.2bn in 2016. More recently, we saw figures from the Equity Release Council that showed a yearly increase of 61% in the number of new plans for Q1 2017. Yet still a generation of cash-poor, asset-rich individuals are approaching retirement unaware of how they can use the money stored in their home for a better retirement. Even if the market can hit £5bn by 2020, it will still make up just a small amount of the £1 trillion in housing wealth that Britain’s over-55s will hold by then, according to Legal & General’s last time buyers research.
How can we encourage these advisers to become active in the sector? The Equity Release Council and all of the providers need to be talking positively about releasing equity when they engage with advisers. Whether we are speaking with existing contacts, or highlighting the growth of the lifetime mortgage market in the media, we must show that this is no longer a product of last resort, but a mainstream solution which can have a truly positive impact on peoples’ retirement.
At Legal & General, we want advisers to know this market has changed. Record low rates on lifetime mortgages, more flexibility that means customers can choose to take what they need now, and access more equity later, and more big names in the market are all there to provide the peace of mind that borrowers need.
We believe the FCA was right to put plans for a standalone qualification on hold. Instead, with demand from consumers clearly on the rise, it’s high time that we raise awareness about the positive role these products can play to unlock the existing opportunities for distribution.