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But why is this sector of the market so important ?
Later life lending and , in particular , equity release has not necessarily had the greatest reputation in the past and we know that some advice firms have been reluctant to engage with this sector of the market because of a fear of regulatory risk or complaints . However , the past few years have seen the market change considerably , products have become more flexible , rates have dropped significantly , and more and more advice firms are entering the market , particularly those who are not just traditional equity release specialists but are looking to diversify their business and expand their client proposition .
As a result , the market is set for its largest ever year in 2021 . Figures from the Equity Release Council ( ERC ) show 2021 is likely to be a record year for lending . By the end of September , equity release customers had borrowed £ 3.46bn this year , putting the market on track for well over £ 4bn of annual activity – a new landmark . This is not including other products , such as RIO and mainstream mortgages for older borrowers , which are also excellent solutions , offering a great many more flexible options and potential for positive outcomes than was seen just two years ago . For many potential customers , there are now genuine choices in the mix of products , and it is most certainly not a case of ‘ equity release or bust ’. Many will have the choice of rolling up interest or servicing a mortgage . Further to this , with a reported only one in five mortgage advisers active in the equity release market , many borrowers struggle for fulfilment with regard to advice , so if
... more and more advice firms are entering the market , particularly those who are not just traditional equity release specialists but are looking to diversify their business and expand their client proposition
you are a firm that can offer the full spectrum of later life lending solutions , you may find yourself in a position where you have a clear differentiator against your peers .
The main driver for growth is obviously there is a demand from consumers . People are living longer and therefore need income ; attitudes in retirement have changed and many of the mortgages taken are lifestyle-driven ; a growing number of older borrowers wish to help their children and grandchildren with equity to get on the housing ladder . Stamp Duty had its effect and whilst that is at an end , the demand to help first time buyers get on the ladder still remains and there will undoubtedly be more of a call on the ‘ Bank of Mum and Dad ’, or ‘ Grandma and Grandad ’, to support this further .
Utilising the housing equity of the parent or grandparent can be a much better way of helping a younger borrower buy the property they want through a gifted deposit . High loan to value mortgages were one of the most impacted areas during the first lockdown , with products disappearing and rates shooting upwards . Whilst this situation has improved , clearly the benefit of addressing the ‘ blended ’ rate or aggregate cost in helping both first time buyer and the family providing the gift is one worth looking into for the right type of customer . We have seen many firms who do not wish to advise on equity release or RIOs work with a referral partner in order to assist them to actively enable more of their firsttime buyer clients to access deposit funds .
In the past few years we have also seen a considerable rise in lifestyle requirements such as home improvements , holidays and new cars . Whilst the foreign holiday may seem a distant memory , the need to adapt homes or look at UK holiday lets has increased dramatically . A variety of sources suggest the housing market has increased in value by in the region of 10 % in the past 18 months so , at a time when potentially investments and pensions have not performed so well , with so much locked up housing equity , in the right circumstances it makes sense for your clients to at least consider drawing on it to live a more fulfilling retirement . This is particularly evident in the fact that , unlike drawing on their pension , they could receive a tax-free income , so it can be an efficient way to protect their wealth . I believe that post-covid , just as in the mainstream mortgage market , we will see an increase in the need for flexibility . It is highly likely that older borrowers will unfortunately need to help their children and grandchildren who have been affected by the pandemic . In some instances , these may be short-term requirements , so flexibility will become increasingly important .