First up, let me wish everyone reading this a very Happy New Year. I hope you managed to get some much-needed rest over the Christmas and holiday period and that you feel suitably energised for what lies ahead.
Predictions about the year ahead are numerous and can leave you with a little egg on your face should they be revisited and ‘marked’ in the future. However, it’s absolutely right to be planning and preparing for what you think might be coming over the horizon, particularly if the trends are strong, and if you can already see a pathway through a marketplace which is prone to constant change.
We are barely into the early days of a brand new year so I’m loathe to go out too much on a limb about where we are heading, but as mentioned I think it’s possible to see a direction of travel in certain areas.
Product wise, we certainly ended 2022 in a much better position than we might have anticipated, especially given the fallout from the ‘Mini Budget’ that put such a spanner in the financial works of so many stakeholders, particularly lenders/providers and, of course, advisers trying to find the right outcomes and solutions for clients.
That said, I think it’s still possible to sense an inkling of market moroseness still lingering around from that Autumn period, and why wouldn’t we, given the hugely negative impact those decisions had.
However, this is a new year, and I’m hopeful that the further away we get from that ill-fated period, the better our market will look and the outlook will become.
Certainly, when it comes to product availability, pricing and criteria, we have moved some distance from the post ‘Mini Budget’ madness, and in a wider economic sense, the forecasts for both inflation and rates have shifted downwards from the somewhat apocalyptic path we appeared to be on back then.
Last month inflation showed a drop, albeit still at double-digit levels, and all signs point to this continuing to fall throughout the rest of 2023, which would mean rates will hopefully not need to rise by as much as feared, and at some point – in the not too distant future – we might begin to see a reversal take place.
In our sector, rates obviously rose in Q4 2022, but as we ended the year we did start to see some falls and I’m optimistic that this will continue and we might begin to see low LTV rates in the high fours and that we’ll get more competitive rates at higher LTVs as well.
I’ve talked a lot about equity release, for example, not being a rate-driven product and that remains true, however none of us are going to complain if rates do continue to track downwards.
At the same time, we also know that the gap between rates on lifetime mortgage products and other types of borrowing available to older consumers is smaller than it’s ever been before. And that’s not even taking into account the greater challenges that exist in trying to secure that alternative borrowing, with higher rates being accompanied by criteria and affordability tightening, and an increase in the fees that come with these products, particularly unsecured lending.
Lifetime mortgages provide strong value in this light, and we must also not forget we are dealing with a customer demographic that will have seen, lived through, and paid far higher rates than we have today on lifetime mortgages.
Let’s not forget that this is all relative, and as long as advisers are highlighting all aspects of this product/rate mix and the client has full understanding of what they are getting/what it costs and what alternatives they may (or may not) have, then price should not be putting off any potential client interaction.
Overall therefore, we remain in a very strong place in terms of the later life lending market, the momentum we have built and the products/rates we are able to access for clients. I also sense a very strong sense of resilience amongst advisers and firms about what they can achieve in 2023; last year was not an easy one to navigate and the strong foundations that were built as a result of that, are likely to make a real difference in terms of achieving great things in the next 12 months and beyond.
We will be here every step of the way to support you and to make sure you make the most of every single opportunity that is available to you. You have my word on that.
Stuart Wilson is chairman at Air Club
