There’s never been a better time to enter the equity release sector

Warren Bleechmore
December 19, 2022
December 19, 2022
Insights

The equity release market is growing at an impressive pace. The sector’s trade body, the Equity Release Council, reports that more than 200 people a day are unlocking cash from the value of their home through equity release.

In the second quarter of 2022, £1.6bn was released from properties around the country.

The popularity of this product looks set to grow further. There are now more than 11 million people aged over 65 in Britain – Age UK expects that figure to swell by a further two million over the next decade.

That will mean the over-65s represent more than a fifth (22 per cent) of the UK’s total population, and many could be looking to equity release to help fund retirement or other needs. Now could therefore be the time for lenders to consider entering this market and ensure they are offering a product range their customers are demanding.

It’s not just the growth of the equity release market and the opportunity to find new customers that are reasons to enter this sector either. Technology is adapting to support the market, including specifically designed programmes to help clients achieve their equity release goals.

A changing landscape

Demand is increasing, especially for lump sum products, as homeowners look to improve or extend a current property or help their younger relatives onto the property ladder.

For many, it is logical that they use their equity to support family members. By releasing cash, they can effectively distribute their estate early. For example, first-time buyers, who may need a financial boost to get onto the property ladder, can benefit from the released money by putting it towards a deposit.

Despite the demand, current economic conditions has meant the ease of taking out an equity release loan has fallen in recent years, along with the flexibility of products, as new competitors have come to market. However, technology is increasingly available to support lenders entering the sector for the first time to mitigate these challenges.

At a time when many people may be hesitant to make major financial decisions given the instability, there is still a broad range of products to suit many borrowers. This, coupled with the right guidance and advice, can help people determine the best path forwards. This is facilitated by the range of technological solutions being offered by third-party providers.

Serving your customers

Entering the equity release sector could also be a prudent decision for lenders when it comes to meeting new rules and regulations.

At a time when the Financial Conduct Authority (FCA) has announced new Consumer Duty rules, offering products designed to meet the needs of older customers and providing a holistic service can help lenders demonstrate that their clients’ interests are at the heart of what they do. This increased regulatory focus on the sector should be welcomed. Making sure customers are fully aware of all available options, including equity release, will help to ensure better outcomes for them in later life.

At the same time, there are technological solutions to help lenders and their advisers assess customer vulnerability, a growing focus of the FCA, particularly mental capacity and financial health. Through this new technology, products can be tailored and sold in a sensitive way to the right customers. Software providers like Finova are even launching hybrid equity release products, which will help to fill a gap in the younger (age 55-60 years) market and allow more customers to access products.

Technology has evolved to allow products to be tailored in several ways. For example, lenders can alter prices to be more competitive or add extra product features such as flexible payment options.

As the equity release sector continues to grow its share of the mortgage market and more of the UK’s over-55s look to unlock their housing wealth in later life, it would be prudent to further explore their options in this area. With a bright future ahead for the market and technology that is supporting growth, now is the time for lenders to consider launching their own equity release propositions.

I have 30 years Financial services experience in both Australia and the UK.