Why the lifetime mortgage sector must support advisers entering the market
Marie Catch (pictured), head of mortgage broker sales at Legal and General Home Finance (LGHF)
It’s no secret that equity release is continuing to rise in popularity amongst the over-55s.
Between July and September this year older homeowners released nearly £11m of housing equity a day, according to the Equity Release Council.
The lifetime mortgage market is a fast-growing, exciting place to be and with £1.8 trillion of housing wealth in the hands of Britain’s over-55s, the sector has the potential to be even larger in the years ahead.
However, for the market to reach its full potential, one of the key challenges that the industry must overcome is the need to match demand with distribution capability.
Changes in the market have already helped to transform opinions around equity release.
Record-low rates, the No Negative Equity Guarantee and flexible products such Legal & General’s Optional Payment Lifetime Mortgage, have all helped to tackle key concerns around issues such as roll-up interest.
However, thousands of older homeowners are still in the dark and unaware of how their housing wealth could help them enjoy a better, more colourful retirement.
Unfortunately, the legacy of the equity release market’s early days still lingers with some potential borrowers and advisers, and then there are those who simply are unaware of lifetime mortgages and the options available to them.
One solution is to generate more conversations about lifetime mortgages as part of a normal retirement planning conversation.
This requires lenders and other stakeholders in the market to support advisers, qualified and unqualified to help them kick-start conversations about equity release with their older clients.
But it’s not just a case of the advisers having the qualifications; they also need to have the confidence to advise their clients on later life lending.
Experience based on frequency of conversations is important in this regard.
In addition, tools and educational workshops are vital to helping build an understanding of equity release in the intermediary market and to support advisers to take advantage of the opportunities presented by the lifetime mortgage sector.
At Legal & General, we’ve already created a series of foundation workshops to help brokers start advising their clients on equity release.
These sessions covered topics ranging from the step-by-step LTM advice process and where to find prospective clients to the differences between underwriting a residential mortgage and an equity release product.
The sessions, held nationwide, were designed to empower advisers considering this market as part of their business mix.
Lenders need to consider taking a similar approach to engage advisers who don’t yet have the necessary qualifications. The first step into any new sector can be daunting, so it’s important the industry offers as much support as possible to help advisers understand how to approach the opportunity that this sector presents.
Again, at Legal & General Home Finance we’ve also run workshops in association with the Chartered Institute of Insurance (CII) to help advisers plan and prepare for their equity release qualifications.
Equally important is getting those who are already qualified to use their expertise while also attempting to match demand with distribution by enticing ‘new blood’ into the lifetime mortgage market.
Finally, it’s important to recognise that there will be brokers who simply don’t intend or don’t want to advise their clients about lifetime mortgages.
However, with an ageing population that is increasingly looking to property wealth to fund their retirement, advisers will be more likely to encounter clients who want advice on later life borrowing.
The task for the industry is to signpost to these advisers the correct tools to use to ensure that their older clients are appropriately referred to market specialists and master brokers.