Q1 lending has fallen to £699m, the lowest since the first pandemic lockdown, as consumers and industry alike cope with the new interest rate environment. Read the full report here LINK and find out what some of the industry’s leading experts have to say below.
Craig Brown, CEO, Legal & General said: “It is understandable that the equity release market has dipped in the first three months of this year, given that customers have been adapting to challenges in the market and assessing their financial responsibilities. However, property wealth is still the largest asset for many people, with the latest house price data from ONS showing that prices have continued to grow by 5.5% in the 12 months to February 2023.
“Equity release plays a significant role in later-life finance, whether that’s helping people to enhance their current homes, gift to loved ones, or to pay off existing debts, such as an outstanding mortgage. Looking at the ERC statistics, we can already see that market activity is starting to recover, as product availability and pricing continue to stabilise. As such, we’re optimistic that the market will continue to improve over the coming months and years ahead.
“The equity release market offers some of the most stringent safeguards across the financial services sector and, with Consumer Duty coming into effect soon, we’re sure advisers will continue to ensure their conversations with clients provide a holistic range of solutions suitable to individual needs.”
Simon Gray, managing director, HUB Financial Solutions, said: “Market conditions have changed markedly in the last six months and potential new customers are quite rightly assessing their options carefully. 
“Existing customers are protected by interest rates that have been fixed from the start of their plan so they avoid the impact of interest rate hikes, but they may benefit from future interest rate drops by re-broking. This changed environment really underlines the importance of high-quality advice to ensure the decisions customers make work in the customers’ best interests over the long-term.
“Property continues to offer many homeowners the opportunity to use the wealth they have built up in their homes to support their aspirations in later life, whether that is to improve their own lives through having extra income or lump sums, or the lives of their family through gifting.”
Will Hale, CEO, Key said: “Today’s figures highlight a perfect storm which has sadly negatively impacted many over-55s. Whilst the demand from older customers to explore how their housing equity might help them navigate the current economic challenges has remained strong, the Mini-budget in September saw interest rates increase sharply and LTVs fall limiting the product options available to advisers. Understandably customer confidence was also impacted as they watched dire predictions about the UK economy and were reluctant to commit to long-term financial decisions
“Although we have come close, the Bank of England agrees that there will not be a recession and while house prices may fall slightly, this will be short-term and manageable. That said, inflation has remained above 10% for the seventh straight month and even with the recent State Pension increases, many over-55s are feeling the pinch.
“While borrowing in later life is not the right answer for everyone, it is a viable option for many older homeowners who are keen to support themselves as well as their families. With significant latent demand continuing to build post the Mini-budget and more attractive product options re-emerging , I do think we will see a return to more normal lending volumes in 2023. Looking longer-term, there is an increasing realisation amongst older customers and the wider adviser community that modern lifetime mortgages offer a combination of flexible features and embedded protections that make them an attractive alternative to other forms of later life lending.
“However, this positive vision will only be achieved if as an industry, we continue to invest in product innovation and the evolution of advic models to ensure we consistently deliver the good customer outcomes that Consumer Duty demands .”
Stephen Lowe, group communications director, Just Group, said: “Today’s figures show the real impact of interest rate policy which has seen the Bank of England hike the official bank rate from under 1% a year ago to 4.25% today, quickly pushing up borrowing rates across the board. Against such a backdrop of uncertainty, it was not surprising to see demand from some potential customers reduce. 
“Demand from customers with core needs remains strong and the structural drivers of consumer demand over the medium term remain intact. Lifetime mortgages offer a way for homeowners to use their property wealth in later life, whether that is to boost regular income, pay off expensive debt, release lump sums or gift money to loved ones.
“It is essential customer understand their options and use equity release when it is most suitable for their particular circumstances. Today’s lifetime mortgages offer flexibility and a wide range of features, such as accessing medically underwritten rates to using drawdown arrangements to interest-servicing – all of which can reduce borrowing costs.
“It’s a complex market, reinforcing the need for high-quality professional financial advice to investigate the alternatives available to customers. Only then can a customer decide whether a lifetime mortgage really is the best solution and, if so, an adviser can guide the customers to a product with the optimal blend of features to meet the customers’ needs.”
Kay Westgarth, director of sales, Standard Life Home Finance said: “Today’s figures from the Council highlight what has been a challenging period for the later life lending market. Having seen record figures in 2022, the September mini-budget saw rates increase, LTVs fall, and some customers adopt a ‘wait and see’ attitude to accessing housing wealth. 
“This impact is clearly seen in Q1 2023 but we do believe that given the strong underlying customer demand and innovation seen across the market, subsequent quarters will see stronger lending volumes.
“This innovation is key to supporting a wider range of customers with diverse needs. When you consider that customers made £102 million worth of ad hoc repayments in 2022, it is clear to see that these flexibilities are providing people with the ability to actively manage their borrowing and tailor products to their own circumstances.
“Using housing equity is becoming increasingly common in retirement and with the support of specialist advice, customers can find the right product for their individual situation.”
Sadna Zaman, proposition development manager, Canada Life Home Finance said: “The challenging market conditions brought on by the mini-budget have had a serious knock-on effect on the equity release market. As interest rates remain high, we are continuing to see a sharp fall in the number of customers releasing equity from their homes.
“Even though the market remains subdued, we, as an industry, must continue to highlight the role property wealth can play as part of holistic retirement planning. In today’s uncertain environment, equity release can provide both flexibility and certainty to those looking to access cash from their homes to supplement their retirement income. However, as releasing equity is a lifelong financial commitment, it is vital people seek the support of a financial adviser to understand if the product is suited to their needs and talk through their options with loved ones before making any financial decision.”
