Rising interest rates and the cost of living have meant the equity release market has changed in the last year and advisers may need to work harder to source leads in the year ahead, an industry expert has said.
Speaking to FTAdviser, More2life director of manufacturing and adviser propositions, Les Pick said the equity release market has enjoyed a period of “substantial growth” over the past few years, but “while this will continue, advisers may need to work harder to source leads and engage with customers”.
“Those who have taken their foot off the pedal for the entirety of December may well find that it takes them sometime to catch up in the new year,” Pick said.
A year of note
Pick believes the equity release market is on track for a record-breaking year in 2022, with lending expected to reach £6bn.
But despite this growth, Pick warned that 2023 will be a very different year.
“While the pandemic is a distant memory, the cost-of-living crisis will continue to bite and this sustained period of uncertainty will impact consumers spending as well as borrowing habits,” Pick said.
In Pick’s view, repayment of debt, a need to boost retirement income and a desire to support the wider family financially, are likely to be the main drivers behind the market in the new year.
“We do anticipate that we will continue to see fewer borrowers looking to fund discretionary spending and an increasing number focused on financial resilience as well as management,” Pick added.
Looking back on 2022, Pick recalls that the first four months of the year were “business as usual” for the sector as it started to see more customers using equity release and lifetime mortgage products to fund “pent up discretionary spend from the pandemic”.
April then saw the Equity Release Council introduce its ‘fifth standard’ which guaranteed all new customers the right to make ad hoc payments on their borrowing within lenders limits.
According to Pick, this simply formalised something many lenders were offering already but it helped make the products available on the market “the most flexible we have ever seen”.
All changed then in autumn following Liz Truss and Kwasi Kwarteng’s “mini” Budget.
In Pick’s words, the uncosted tax cuts in the “mini” Budget “set the hares running” in the later life lending area and led to some lenders exiting the market as well as higher interest rates in the sector than were seen in several years.
Since then, some lifetime mortgage lenders have cut their interest rates to sub-6 per cent levels, after brokers said their clients simply could not stomach 8 per cent rates leading to a ‘wait and see’ attitude which inevitably stalled lender sales.
More2life is one such lender, with Pick noting the company “worked hard with its funders to ensure we could continue to support customers”.
At the end of November, the lender announced that rates on its flexi-choice range fell to 5.94 per cent.
