Experts reflect on Council’s latest report

Industry leaders have had their say on the Council’s recent Autumn Market Report which showed average rates for equity release products have reached record lows of 4.11%

Published on Monday September 21, the report illustrated that equity release rates fell further than other personal borrowing products, such as mortgages, personal loans, credit cards and overdrafts, over a two-year period. Product choice was once again up but the affect of covid-19 was felt in Q2, with the first half of 2020 showing an overall customer activity drop of 14% when compared with last year.

Stephen Lowe, group communications director at Just Group said: “The record start to the year was thrust into reverse when lockdown was announced, presenting huge challenges. We quickly moved to home-based working and modified the way we did business to adapt to the new constraints but understandably many potential customers put their financial plans on ice.

“Since those early days of the spring, we have seen activity picking up and returning to pre-covid levels. The structural drivers of growth for the equity release market are strong and will result in people continuing to use home equity to support their later life.

“Customers are benefitting from lower borrowing costs on lifetime mortgages and the rapid expansion of more flexible options. These product innovations are helping to attract a broader range of customers from people looking to boost their income, to those needing a cash lump sum and others wishing to gift money as part of estate planning.

“Equity release is not the only market to have witnessed some short-term volatility in demand as a result of Covid, but its growth is underpinned by long-term financial and demographic trends.”

Alice Watson, head of marketing, insurance at Canada Life, said: “Despite the unforeseen challenges of the last six months, it’s very encouraging to see the equity release market continuing to evolve to meet the needs of the over-55s. Not only have interest rates continued to fall, but product choice has increased dramatically since the start of 2019.

“Retirement is changing, and so too are the needs of today’s retirees. Homeowners are looking for flexibility and certainty when it comes to planning for retirement, and property wealth has a significant role to play. Over the next few months, we expect equity release to play an even bigger role as part of blended retirement plans, as the over-55s look for financial security in later life.”

Claire Singleton, Legal & General Home Finance chief executive, said: “A dip in demand during the lockdown was to be expected, but initial signs of recovery show the underlying need for equity release is still there.

“The current environment clearly presents challenges, particularly with the outlook for the future unclear at the moment, however the fundamental drivers of growth remain. There is £2.8 trillion in housing stock held by over 50s, and our research shows that a large number are facing significant financial worries as a direct result of Covid-19, with over a third having seen their household income decrease. Many are concerned about their cost of living currently and are being forced to dip into savings that may have been earmarked for their retirement.

“Property wealth is playing an increasingly important role in people’s retirement planning, and as a result there has been growth in the later life lending market in recent years, for example here at Legal & General we have recently launched a RIO mortgage to complement our lifetime mortgage range. Across the industry, we’ve seen innovation, greater choice, flexibility and increasingly competitive rates.

“It is unfortunate that many UK households find themselves in financial difficulty as a result of the pandemic and we know from our research that a significant number of people approaching retirement age are rethinking their plans. Releasing equity from their homes could give some people more options and flexibility to their planning.

“Record low rates and more choice are clearly in the customer’s interest, but given many could be vulnerable due to financial stress, it even more important for them to pause, take advice and avoid reacting hastily to financial concerns. While fantastic progress made by the sector has brought equity release into the mainstream, homeowners should still have an open conversation with their adviser and remember that equity release is a long-term product.”

Will Hale, chief executive officer at Key, said: “The Equity Release Council’s Autumn 2020 Market Report shows how hard the market has been working to support customers during the current pandemic. Not only are rates at historic lows but innovation has arguably never been greater with lenders focusing on making products as flexible as possible.

“The fact that equity release rates have fallen further than other borrowing options over a one-year and two-year period highlights how increased competition can benefit older homeowners – particularly at a time when many mainstream lenders are tightening LTVs and lending criteria.  At the moment, the housing market has remained relatively resilient and over-65s own more than £1.1 trillion in housing equity which can support their own retirement planning as well as be used to help family.

“Normal business conditions may be some time away but the combination of strong customer demand and ongoing innovation and responsiveness from both lenders and advisers across the equity release sector should mean the market will return to growth by the end of this year and into 2021.”

Dave Harris, chief executive officer of more2life, said: “The figures show that, despite the ongoing crisis, innovation remains high on the agenda for lenders in the equity release market as they look to support older homeowners. Indeed, with average rates falling to record lows and product choice improving significantly, older borrowers have now got more flexibility at their fingertips than ever before when it comes to their financial options. Although consumer demand weakened in Q2 as a result of the UK’s lockdown, product innovation means the lifetime mortgage market is in a prime position to cater to growing demand from later life borrowers.

“It has undoubtedly been a challenging year for the industry, but it’s encouraging to see the positive response from lenders and key industry players to ensure homeowners have had access to the support they need. As we look ahead to the remainder of the year, it will be paramount that the sector continues to work together to ensure that this support is still available for customers who need it and that advisers are fully equipped to guide older clients to the best financial solution for their short and long-term needs.”

To view the full press release including the data tables download the Autumn 2020 Market Report Media Alert or download the report in full click here Autumn 2020 Market Report