The Council published two major reports in October. The Q3 market data recorded fragile growth for the first time in 12 months with quarterly increases in both new customers (10%) and total lending (8%). And the Autumn market report revealed that record amounts of capital was being paid off mortgages. Read how some of the industry’s experts reacted below.
Market data
Stephen Lowe, group communications director at retirement specialist Just Group, said: “Overall business levels are still sharply down on a year ago but there are optimistic signs that a floor has been reached on which to build.
“Both new customer numbers and total lending in Q3 were the highest we’ve seen in 2023 and we would expect further improvement going forward. After the shock caused by the rapid rise in interest rates over the last two years, it is positive to see the Council highlight a recent reduction in the average lifetime mortgage interest rates.
“An ageing population means an increasing number of homeowners are heading into retirement each year. The over-65s are estimated to have £2.6 trillion of net housing wealth*. That offers a lot of firepower to those seeking ways to supplement their income, improve their living standards, pay off more expensive debt, or to generate lump sums for themselves or loved ones.
“Higher interest rates are naturally making people cautious, but the fundamental drivers of growth remain as strong as ever. The range of options available makes it a difficult market for people to navigate alone. We urge people to seek out high-quality professional advice to ensure they consider all the alternatives available to them and choose the best solution to their individual needs.”
Simon Gray, managing director at equity release advisory firm HUB Financial Solutions: said it was good to see the market stabilising and some modest growth after such a tumultuous period.
He agreed that the flexible options built into many of today’s plans were putting customers in control, and that there was a huge amount of choice enabling advisers to tailor plans to customer needs.
“High-quality professional advice remains essential for customers to find the most suitable deals that give them the right combination of certainty and flexibility, whatever their financial objectives,” he said.
David Burrowes, Chair of the Equity Release Council, said: “These figures suggest the process of building back is slowly underway in the equity release market, after a period where higher interest rates have prompted consumers and industry to reach for the ‘reset’ button.
“With customers starting to venture back, the market is at the start of a gradual but fragile road to recovery, with pent-up demand likely to emerge in future years as the interest rate cycle begins to turn again.
“While the clock has been wound back on lending activity and loan sizes, product innovation has increased the flexibility of lifetime mortgages.
“New customers of plans that meet our high consumer standards can use voluntary repayments to keep their costs in check while existing customers are free to take extra instalments of money as they need it, safe in the knowledge their previous borrowing is fully insulated from rate rises.
“Looking ahead, we must be wholly committed as an industry to putting equity release in its proper context as one of a range of later life lending options and putting property wealth in its proper context at the heart of every retirement planning conversation.”
Autumn market report
Craig Brown, CEO, Legal & General Home Finance
“The current climate has created a degree of caution among borrowers but, thankfully, the lifetime mortgage market has evolved and now offers greater flexibility, so that homeowners can access the value tied up in property, while managing repayments over the life of their loan. Legal & General Home Finance led the way with our Optional Payment Lifetime Mortgage, allowing customers to pay the interest on their loans through a regular monthly direct debit, and this remains a popular choice with customers.”
Stephen Lowe, group communications director at pensions specialist Just Group
“Today’s report shows how the equity release market has experienced a major reset which is not surprising when you consider that the Bank of England interest rate of 5.25% is now more than 50 times higher than it was just two years ago, pushing up borrowing costs sharply.
“Changes on that scale are inevitably going to make people more cautious, particularly when they are making long-term decisions. Against that backdrop, sits the question of whether the market has hit a stable level from which it can grow. We have started to see the number of new plans agreed each month trend upwards and providers responding by increasing the number of new products available.
“Looking longer-term we think that there are important fundamentals that will help drive business growth. The Council highlights the fact that there are large numbers of people – government figures estimate 53% – due to retire by 2030 whose income is likely to fall short of the ‘Moderate’ Retirement Living Standard calculated by the PLSA.
“Accessing the wealth locked up in a home in later life can help provide an income boost to this group. It can also help those reaching retirement with debt, and wealthier people caught up by the freezing of Inheritance Tax thresholds. Modern lifetime mortgages can be a powerful solution to a range of consumer needs and should be considered as part of later life financial planning.”
David Stevens, director of Savings and Retirement at LV=
“With the backdrop of rising interest rates and reduced savings, consumers are much more considered about how they could use equity release products to better suit their needs in later life. LV= research reveals that one in four adults would consider a lifetime mortgage, with 11% of workers planning to use the value of their home to fund their retirement.
“The opportunity for the industry is to continue developing products which offer useful options to customers, providing flexibility for the mortgage to adapt to changes in circumstances and lifestyle. This is an important element of enabling equity release to be seen as a foundation consideration in retirement planning for the many.
“The role of advisers in supporting their clients through making these choices is incredibly valuable to help customers decide with confidence what is right for them and addressing the worries they may have.”
Simon Gray, HUB Financial Solutions managing director
“There’s been a change in market conditions caused by rapidly rising interest rates which, after years of low rates, is naturally going to make people think carefully about future borrowing.
“Existing customers are protected by fixed interest rates, while future borrowers are not necessarily locking into today’s rates forever, because of the option to rebroke should interest rates fall back.”
- The views of contributors are not necessarily shared by the Council
