Equity release advisers are optimistic about the sector’s prospects for the coming six months, with 60% predicting an increase in the size of the market and 40% envisaging it continuing to grow at the current rate, according to new research by independent equity release adviser company Bower Retirement Services.
With the first half of 2014 producing a record £641.2m worth of released equity, the first instalment of Bower’s Quarterly Equity Release Adviser Tracker found that many advisers felt the next six months would see this high eclipsed once more.
Looking at the product features that customers find most important, Bower advisers were unanimous that the ability to stay in their own homes as long as desired was the most important stipulation, with 90% of respondents deeming this very important. The ability to make partial repayments without penalties also featured prominently and the abolition – or increased flexibility – of early repayment charges topped the broker product wish-list.
Paying off debts is the main reason for older homeowners releasing equity from their properties this year. Bower’s research found that more than two-fifths (44%) of its advisers cited debt consolidation as the most common reason for accessing capital, followed by the increased cost of living (18%) and home improvements (12%).
Providing financial assistance to family members has long been a common reason for releasing equity, but it’s not just house deposit assistance as other cases have included helping a customer’s son establish a hairdressing business and another helping to fund his nephew’s pilot training.
While this hints at the versatility of equity release, Bower advisers are quick to point out to potential customers where the plans may not be well suited and the research found that, on average, one in ten customers were advised not to proceed.
The most common reason given for this was that advisers didn’t feel the customers had a pressing need for the cash, whether because of existing savings or simply delaying using equity release until a more suitable time.
The research also revealed that around 36% of older homeowners enquiring about equity release still have a mortgage and, of these, more than three-quarters (78%) have interest-only home loans.
Geoff Charles, CEO of Bower Retirement Services, said: “Our inaugural adviser tracker survey shows that while traditional reasons for releasing equity such as funding home improvements remain popular, older homeowners are increasingly using the value in their homes to manage debts and help counter the effects of rising costs of living. It also shows that attitudes to inheritance are changing, with many mature individuals preferring to assist younger family members while they are still alive rather than bequeathing property once they have passed away.
“While equity release can be a valuable method of accessing funds for some, our advisers have their customers’ best interests at heart and are always quick to stress when they feel it might not be the most suitable option for an individual. Evidence from our advisers suggests that a fair percentage of older homeowners they see don’t have a pressing need for an equity release plan and they are fully transparent in communicating this to those in such a situation.
“It’s encouraging that the majority of our advisers feel the equity release market is set to continue its growth over the coming months and this is testament to the increasing awareness and knowledge of the sector among potential plan holders. As the realisation dawns of how versatile equity release can be, it should continue to thrive and expand.”
