Covid crunch: sector leaders comment on the Council’s Q2 figures

Industry leaders have commented on the Equity Release Council’s latest market figures. The data, which was released yesterday, shows initial signs of recovery signs in June.

However, overall Q2 activity fell by a third with £698m of property wealth was accessed by older homeowners, down by 34% and almost £400m, from the previous quarter.

Alan Lakey, director at Highclere Financial, said he had seen increased interest due to a review of customers on higher interest rates but acknowledged the lull.

He said: “It’s no surprise that second quarter business was down because potential borrowers were far more concerned about their health and lenders struggled to put in place valuation methods. This meant that the vast majority of applications suffered three to six week delays.

“The third quarter will likely show an explosion because it will enjoy business that started in Q2 but was delayed in some fashion. Interest is likely to be much higher throughout the rest of the year prior to the property price slump occasioned by the return of Stamp Duty, next April.”

Canada Life’s head of marketing (insurance) Alice Watson said she was optimistic for a return to full growth as lockdown starts to lift.

She said: “The market has demonstrated its resilience by adjusting to new ways of working and embracing technology. I’m confident that the market will continue to pull together to deliver solutions for advisers and their clients.”

Claire Singleton, CEO of Legal & General Home Finance, said that the dip in demand was to be expected. She added: “The decision to pause and take time to consider their options will have been the right one for many homeowners, and people should always think carefully before taking out a lifetime mortgage.

“As the economic picture becomes clearer I think demand will return. I anticipate some homeowners will look to supplement their income or support family members through gifting. For others, the easing of lockdown will open up opportunities for holidays, weddings and those other ‘big ticket’ events which drive demand.

“Figures earlier in the year, and initial signs of recovery as lockdown eased in June, back this up, showing that the underlying demand is there. In the longer-term, I expect the growing recognition of equity release as a valuable product to continue.”

Dave Harris, CEO of more2life, said the findings highlight the direct impact coronavirus has had on the wider housing market and that the later life lending sector was no exception.

He said: “While some older homeowners will look to take a more cautious approach to borrowing over the short-term, others will need to look at all their assets as they carefully plan their finances.

“The later life lending sector has worked hard to keep the market open during these unprecedented times, ensuring borrowers who need to access their housing equity have been able to do so.

“Overall, the strong underlying trends that have driven the lifetime mortgage market in recent years remain and we would expect to see a gradual return to pre-crisis lending volumes later this year. As we start to emerge from the crisis, it is vital that our industry continues to support and champion advisers as they provide valuable advice to customers who need it now more than ever.”

Mark Gregory, founder and CEO of Equity Release Supermarket, said his firm had seen 3% year-on-year growth but a 19% drop from Q1 to Q2.

He added: “This year has really been a story of two halves, with a complete variance in Q1 and Q2 as a result of Covid-19. We saw 84% lending growth YOY in Q1, dipping to just 4% in Q2 and a total lending reduction of 19% compared to Q1.

“Covid-19 obviously had a negative impact on the equity release market in Q2. However, as our data shows, this was due to lenders and solicitors being unable to process business due to lockdown restrictions, rather than the latent market need. Consumers’ appetite for equity release has not been diminished at all by the pandemic.”

Stephen Lowe, group communications director at Just Group, said the speedy response from lifetime mortgage providers helped ensure that clients who had already started the process of releasing funds from their property or were keen to do so, were able to proceed if they wished.

“It would have been naive to assume the busy start to the year would continue throughout lockdown,” he said.

“Recent months have presented everyone with huge challenges and our teams responded quickly. We moved to fully operational home-based working and reworked how we do business to make sure we could continue to help customers and their advisers throughout lockdown.

“We are pleased to note signs of business levels building, which mirrors the greater confidence the wider property market appears to be enjoying.”

Will Hale, CEO at Key, said while the market has faced challenges in Q2, customer demand has remained strong and measures like remote valuations mean we are seeing signs of a recovery in completions.

He added: “This is encouraging and underlines our belief that we will see a bounce back in the market through the second half of the year.

“That said, the market has experienced a significant slowdown not only because cases are taking longer to complete but also because homeowners, whilst wanting to explore all their options, are rightly cautious and are often choosing to delay accessing their property wealth because of the ongoing uncertainty.

“At Key, we have also been advising customers to proceed only when they have essential financial needs to address and recommended a more conservative approach for those considering aspirational spending requirements.

“Our recent market monitor suggests that people are being cautious and we’ve seen a quarter on quarter drop in spending on holidays (8% to 4%) but an increase in mortgage repayment (25% to 31%). Unsurprisingly in these circumstances, helping families is also front of mind with 21% of the proceeds of equity release being used for this purpose.”

To read the full Q2 report including comments from Council chairman David Burrowes please follow this link 200728 Equity Release Council Q2 2020 market statistics – media alert – final

The views of contributors are not necessarily those of the Council.