It seems somewhat odd but we already over a sixth of the way through the year, and soon we’ll be able to reflect back on the first full quarter of activity within the equity release and the wider later life lending sector.
At the start of the year I felt it was going to be a year that grew in activity the longer it went on, and these first couple of months have not changed my mind in that regard.
We may have a Budget in the middle of March, but it’s fair to say we’re still recovering from last year’s ‘Mini Budget’ and I’m not quite sure what game-changing announcements can be made by Jeremy Hunt this month to significantly shift the dial.
In terms of the wider economy, it’s positive to see inflation starting to come down, and in the residential mortgage space we’re beginning to see rates fall back to their pre-‘Mini Budget’ levels, particularly as lenders fight and compete for the business that is around.
For later life lending, we’ve talked before about how our sector has shifted from a demand based on want, to far more of one based on need, and I do not see that changing anytime soon.
Whether it is the need to pay off the capital after the end of an interest-only deal, or the need to help offspring with deposit monies to get onto the ladder, or indeed the simple need to keep up with the pace of the cost of living, later life lending is going to continue to be fed by these client need requirements.
We recently reviewed ONS data and it seems fairly obvious that many more older individuals are putting off retirement in order to stay in the workforce, and meet the growing costs of running a household. There are now over 1.4 million over-65s in full-time work, and I anticipate this is a number that is not going to fall in the short-term.
If anything it is likely to increase. However we also need to take into account those who are unable to continue working into retirement, those who are no longer equipped to carry out a full-time job, and those who may need to look elsewhere in terms of finding the money they need to continue matching income to expenditure.
Increasingly, I believe, individuals will be much more willing to look at – what is likely to be – their most significant asset, to help them support themselves and their families in retirement.
That greater willingness to access the equity in the family home has been growing for some time, but as we already know, when that need becomes greater and potentially alternative options become fewer, then later life lending becomes a much more attractive option.
Indeed, I expect to see demand grow considerably, particularly towards the end of Q2 and into Q3 this year. At the moment, I’m aware of many individuals who are currently utilising savings in order to ‘top-up’ their incomes and meet these greater monthly financial pressures, but at some point that option may either no longer exist as savings are depleted, or individuals might want to ensure they do retain some of their ‘rainy day’ funds rather than using it all.
Again, here is where equity release/later life lending might fly onto more older homeowners’ radars than before, and it is here where specialist advisers are going to need to put themselves firmly in the shop window in order to support this customer base.
This, as we have always known, makes the case for creating far greater levels of customer knowledge and awareness of their options, and how they can utilise their property.
Yes, the British public are much more aware of later life lending options, but are not necessarily au fait with the process, the responsibilities, and the differing solutions it can offer – for example, the ability to service the loan’s interest rather than opting for roll-up.
In my view, this is going to be a very important part of any client advice provision and customer interaction – indeed it already is. Making sure that clients who do have the money to do so, are aware of the product options that allow them to pay interest, because if we are not on top of this, then this is a sure-fire way to illicit complaints in the future.
Overall, however, I see a 2023 that is going to grow in strength the further on we go, and in that sense, is going to present advisers with more opportunities and a much wider potential customer base as the year progresses. Let’s ensure we are all in the very best place possible to benefit from this.
Stuart Wilson is chairman at Air Club
