13 July 2020
Q&A with Chris Smyth from LV=
Chris Smyth, LV= Equity Release Business Development Manager answers questions posed by one of his colleagues, on the future of the market.
Q: Figures released by the Equity Release Council show that the value of property wealth accessed via equity release products during Q1 2020 rose by 14% year-on-year to £1.06 billion before the recent lockdown. To what extent do you feel that new business will be affected this year?
A: It is difficult to predict how much an affect the Covid-19 pandemic will have on overall borrowing in 2020. What we have seen across the market following the introduction of desktop valuation solutions is a more strict lending criteria as well as LTV’s being lower or on a retention basis, which is unquestionably making some cases unable to proceed. However with recent market shocks and volatile conditions, more and more customers are looking for a safer approach to fund their retirement and lifestyle needs. Equity release provides the peace of mind customers need right now, especially those in more vulnerable positions. Knowing that you can remain at home while still supplementing your income is an attractive alternative for most customers approaching retirement.
Q: Are you still finding strong demand for equity release or have customers put plans on hold at the moment?
A: It very much depends on the personal circumstances and needs. The demand for lifetime mortgages is still there as people are looking for more flexible options to safeguard their retirement and long-term plans. There is also a large proportion of clients who are not in an urgent need to access funds immediately and are happy to wait, so they can benefit from borrowing at the maximum LTV end, without being impacted by the temporary desktop valuation lending criteria modifications.
Q: What impact has the Coronavirus pandemic had on the equity release market? What are the biggest challenges you are facing?
A: The equity release client journey is largely a face-to-face one, from the initial equity release advice to the surveying of the property and also the legal advice. The industry has done a remarkable job in adapting all three parts of the journey to ensure cases can still proceed when customers are in real need to access funds. From a lender’s perspective, the main challenge has been transforming a predominantly full office setup to 95% of employees working from home, whilst still providing the levels of service our customers and advisers are used to. In these challenging times, regular communication is crucial and can be very transformative. We as a lender have channelled our energy on building better relationships with colleagues, customers, advisers and partners.
Q: As an equity release provider how have you adapted your business practices and product ranges during the pandemic to support the equity release market?
A: Our commitment to the advisory market and to our customers has always been to offer the highest level of support and resilience. We’re continuously reviewing our processes to adapt to the constantly changing situation. To help customers who are unable to sign an application declaration, we introduced signatureless application process. This includes verbal or email consent from the client to proceed. We also announced measures to make it easier for advisers to write equity release business during the coronavirus outbreak by launching a desktop valuation solution. This allows customers to access lending while surveyors are unable to visit their properties. To offer customer flexibility we also introduced a six-month equity release interest rate guarantee. For any submitted applications which are unsuitable for a desktop valuation, we will honour the quoted customer interest rate for an initial period of six months and the application will be placed on hold until we are able to undertake a physical property valuation. If we have been unable to issue an offer within 6 months of the date the application was processed, then we will review the situation at that point.
Q: Do you think that the equity release market has responded well digitally to the challenges presented by the Coronavirus pandemic?
A: Yes, remarkably so and we will no doubt be better for it by having shown areas of the process which can be adapted or improved to influence a better customer and adviser journey. This global crisis has become a catalyst for accelerating existing technological and digital trends, helping bring innovation to the equity release market.
Q: In recent years there has been a broadening of the equity release customer, with signs that younger customers are increasingly looking towards it. Is this your experience and do you think this will continue?
A: Absolutely, largely helped by the maturity of many interest only mortgages. Equity Release rates being historically low, combined with the flexibility of today’s plans has resulted in further growth from younger borrowers, this will only develop as the market continues to evolve. Our own customer data also demonstrates that applicants are using their lifetime mortgages in a very strategic and purposeful way, meaning the diversity of opportunities is now appealing to a younger customer base too.
Q: Interest rates on lifetime mortgages have recently fallen to an all-time low. What impact do you think this will have on the equity release market and customer’s decisions?
A: Rate tends to be a driver for most, historically low rates has led to equity release becoming so much more than a product of last resort. We have also seen a large number of plans being re-broked, whereby a customer who originally took out an Equity Release on a higher rate some years ago, redeems and takes out a new plan on often a much lower rate.
Q: Has the equity release market continued to see much innovation over the last 12 months?
A: Incredibly so, the equity release market continues to evolve at a fast pace. Providers are also influencing the change by making regular product improvements, increasing flexibility for customers and introducing additional added value benefits to support the wellbeing of people in later life. We’ve had a really positive response from the advisory sector, telling us our proposition is simple to explain to customers and offers transparent features with flexible approach to the changing customer needs. We understand that later life is a lot more than just financial security and this is part of the innovation process. Our equity release products come with access to LV= Doctor Services*. This is an online consultation service that gives customers fast and convenient access to medical support provided by Square Health, via a simple online app. What’s more, to help customers navigate their way through the care system, LV= has teamed up with MorganAsh to offer customers access to Care Navigator. This is a service designed to help people looking for care options in later life.
* LV= Dr Services and Care Navigator are non-contractual benefits which can be changed or removed at any time.
Q: What are your expectations for the equity release market over the coming 12 months?
A: As we are still in the grips of the Covid-19 pandemic it is difficult to predict how the next 12 months will look. Once physical valuations resume, it will give us clearer picture how the market lies. I expect a very positive H2 with customers unquestionably looking to utilise the wealth within their properties to supplement their income following the affects that Covid-19 has had. We as a business are also working on some exciting developments which will land later in H2.
For more information visit LV.com/EquityRelease or call us on 0800 028 897 (option 1) or email us at [email protected]
The views of contributors are not necessarily those of the Council.