The Q4 and final year data for 2022 showed that lending hit a record £6.2bn and new and returning customers increased 23% year-on-year, to 93,421. Read on to hear from some industry experts.
Craig Brown, CEO of L&G Home Finance said:
“It is great that equity release market growth returned to pre-pandemic levels in 2022, as over 55s continue to use property wealth for their own needs or to support loved ones. The home remains one of the most significant financial assets many homeowners have and our own Legal & General Home Finance data shows that customers continue to use property wealth to provide financial support to loved ones, particularly as younger generations face new financial pressures.
This could include helping family members with a range of costs, such as gathering the all-important deposit to help first-time buyers onto the property ladder. Customers are also using the equity in their property to support vital home improvements, such as replacing a boiler or installing insulation, which helps to increase the longevity of the property and allows people to stay comfortably in their homes. Research from our Equity Economy report last year, showed 13% of equity release customers surveyed accessed their property wealth to finance energy efficiency improvements.
“We understand that customers can be cautious when looking at their property as part of their financial planning and, in fact, it might not be the right route for them. However, the equity release market has some of the most stringent safeguards in place, with providers and advisers adhering to high industry standards.”
Simon Gray, managing director at equity release advisory firm HUB Financial Solutions, said:
“In 2022 the industry helped more customers to meet their objectives and record amounts of lending were recorded. The final quarter wasn’t as busy as people paused in response to the disruption triggered by the volatility in markets following the September fiscal event.
“From the customer’s point of view – good practice remains the same regardless of the external environment. High-quality professional advice is essential to understanding the market and providing robust, repeatable personal recommendations that are in customers’ best interests. Advice helps homeowners consider all their options and navigate what can be a complex market with a wide range of providers, rates and terms.
“Lifetime mortgages can work for a wide range of people looking to boost income, raise a lump sum or gift money but in many cases our professional advisers do find other solutions that better fit the needs of our client. There remains huge potential for homeowners to use property wealth to make their lifestyles become more comfortable or to help their families. In this ever-changing market, professional advice is the best way to help people to understand whether using a lifetime mortgage is their best solution.”
Will Hale, CEO of Key said:
“Today’s figures from the Equity Release Council highlight a healthy later life lending market but one not immune from the impact of the mini-Budget. Their figures suggest that while total lending hitting a new high of £6.2 billion, December was the quietest month since before the COVID-19 pandemic.
“Increased product flexibility and choice has seen the market double in size since 2017 as more people look to improve their retirement finances with the support of housing equity. While rates have increased post the mini-Budget, customers are able to take a more active approach to managing their borrowing using the ability to service interest and/or make ad hoc capital repayments which are common features now across modern lifetime mortgages. Important customer protections such as the no-negative equity guarantee and guarantee of tenure continue to be embedded in all products with features such as inheritance protection offering further flexibility. Also, lifetime mortgages no longer have to be a product for life with fixed early repayment charges creating opportunities for customers to re-mortgage down the line.
“There is no doubt that borrowers and their advisers have become more cautious – and rightly so in this higher interest rate environment. However, whether the answer is downsizing, a retirement interest-only product, equity release or delaying a decision altogether, specialist advice remains vital in helping customers make the best choice for their individual circumstances.
“Equity release is not suitable in all situations but with many people struggling with increasing mortgage payments and rising household bills the sector has an important role to play in helping customers navigate their way through the cost of living crisis and to continue to live a secure and fulfilling later life.”
Stephen Lowe, group communications director at Just Group, said:
“The equity release market set new records during 2022 but the year ended on a cautious note. Total lending of £6.2bn was a record year by some margin, 29% above the figure for 2021 with a record number of customers too.
“Yet the last quarter of the year, usually a strong period, showed a drop off which is understandable given some of the disruption, such as the hikes in interest rates to deal with spiking inflation and the reaction to September’s ‘mini-Budget’.
“There are many individual homeowners with needs that will only be met by accessing some of the equity in their homes and the long-term structural drivers of growth remain strong.
“High quality professional financial advice remains key to ensuring that where a lifetime mortgage is recommended to a potential customer it is because it fits that customer’s requirements and is their best option. In many cases we know that good advisers will recommend another course of action or find another source of funds, such as State benefits or down-sizing. But where releasing equity is suitable, it can be very effective whether the goal is to provide a lump sum, generate a regular income, pay for care or support estate-planning.”
Les Pick, director of manufacturing and adviser propositions, More2Life said:
“2022 was a strong year for activity in the equity release market, with the number of new and returning customers growing by 23% year-on-year – the highest rate of growth since 2018. In other words, the future for our market looks bright.
“With the number of returning drawdown customers also growing in 2022, it is clear that many borrowers look to this market not as a short-term fix, but a long-term solution that can help them to enjoy their retirement or support younger relatives with their own homeownership ambitions.
“That said, the impact of last year’s ‘mini-Budget’ is evident in the figures recorded in Q4 and suggests that while equity release continues to be an attractive option for many borrowers, the shape of the market is changing. In the current higher interest rate environment, we do expect borrowers to be more cautious around the reasons they borrow as well as how much they take out.
“As advisers work to support them, it is therefore more important than ever that they ensure advice is as personalised as possible and they take into account not only a customers’ long as well as short-term objectives but how product flexibilities can support these.”
David Stevens, retirement director at LV=, said:
“Equity release has experienced a significant rise in popularity, as growing numbers of consumers increasingly understand how their property can be an important part of retirement planning.
“Data from the LV= Wealth and Research Programme found that 38% of working adults would consider getting a lifetime mortgage at some point in the future. Some 13% of working adults are planning to use the value of their home to fund their retirement, compared to 5% of retirees.
“It’s not surprising to see that the recent financial turbulence and significant increases in interest rates have already started to dampen customer demand and is a trend that we think is likely to continue into 2023 as the market adjusts.:
Alice Watson, head of marketing and communications, Canada Life said:
“In the final quarter of last year, we witnessed a significant dip in market activity attributed to the turmoil created. Looking ahead, it’s clear that there is a real opportunity for property wealth to form part of holistic retirement planning to help meet the needs of an ageing population.
“In today’s challenging environment, equity release can provide certainty and flexibility for those looking to unlock cash from their homes to meet their evolving needs. However, releasing equity is a lifelong financial decision and not to be taken lightly, so it is essential that people seek financial advice and talk through their options with loved ones before making any financial commitments.”
Stuart Wilson, chair of Air Group said:
“September’s ‘mini-Budget’ gave rise to a challenging final quarter of what was otherwise an extremely strong year for the equity release market. Despite the slower end to 2022, it remained a record-breaking year as total annual lending reached a new high of £6.2bn, up 29% from £4.8bn in 2021.
“Given the cost-of-living crisis and the rate as well as affordability challenges in the residential mortgage sector, we will see over-55s looking to the equity release market for support in 2023. However, this is likely to be different from what they may have considered in January 2022 and product flexibilities such as the ability to make ongoing interest repayments become more attractive than ever before.
“While there is no doubt that 2023 will be more challenging for the market, there will be more opportunities for advisers to support customers than ever before. We would anticipate an increase in 2023 of customers, but likely borrowing a lower average amount as advisers counsel their clients to control debt if possible.”
- The views of contributors are not necessarily shared by the Council.
