Have we reached the point where equity release is firmly part of the financial services landscape? I ask the question because every year people have predicted that the later life lending market will become mainstream ‘soon’.
There are reasons to think that we may well have reached the tipping point and that equity release is widely accepted by both consumers and brokers as being an acceptable option to finance a number of requirements in later life.
The most recent statistics from the Equity Release Council show that the market has recovered from the pandemic, with homeowners aged 55+ taking out 12,485 new equity release plans between April and June this year, equivalent to 205 new plans being agreed upon each working day.
The number of new plans agreed in Q2 increased 26% year-on-year when compared with the subdued market of Q2 2021 when pandemic restrictions remained in place. The figure is only just short of the peak of 12,891 recorded in Q4 2018.
At Smart Money People, we conduct our Mortgage Lender Benchmark every six months to establish which lenders are providing the best service to mortgage brokers and their customers. We are on our eighth edition of the study and it is an established way of helping lenders understand what brokers really think about them, and how they compare with other lenders.
The good news for the lifetime mortgage market is that brokers have reported improvements from lenders in the first six months of the year compared to H2 2021 and generally scores have risen. That said, other sectors that we surveyed have shown greater improvements. In comparison to the previous report, there is greater polarisation in scores between the top and bottom of the league table (as voted by brokers) with those that have performed well doing very well.
We asked brokers for comments about individual lenders and on the whole, their responses were positive – especially about product rates and LTVs. Affordability and criteria remain the areas with the highest satisfaction across the sectors, and along with speed, these areas have stabilised as lenders and brokers have adapted to new ways of working post-pandemic.
However, service failings were the main reasons for complaints. Such comments included “Staffing issues are currently poor”; “Not having one staff member in the moving homes team… meant my client has waited six months and still not moved”; “Abysmal service standards and communications” and “OMG slow, ponderous, not enough staff, too many funders with different deals and rates, lack of communications” – you get the picture.
The later life lending market was generally seen to have responded the quickest within specialist lending to the problems that Covid-19 and subsequent lockdowns created and so it is disappointing to hear brokers report that service has not sufficiently recovered since the pandemic. Providers need to address this issue and we hope to record an improvement in service in our H2 report.
Looking at individual providers, the top spot in the lifetime mortgage lender league table continues to be held by Canada Life with Pure Retirement and Legal & General close behind. Canada Life scored the highest of all the lifetime mortgage providers for five out of six metrics and came a close second for the remaining metric (communication).
The lender itself recently provided some insight into the reasons for customers looking to take out equity release, which is significant considering the cost of living crisis we are currently experiencing. 50% of equity release applications it received in the first six months of the year were from customers looking to clear their existing mortgage, which was the most common reason given for releasing some or all of the equity. Next was raising money to pay for home improvements (38%) and supporting day-to-day living costs (20%).
Unsurprisingly given continuing issues of housing affordability, 15% chose to release equity for gifting purposes. One-off purchases also featured, with booking a holiday at 14%, buying a new property at 12% and buying a car at 10%.
These reasons highlight how equity release is being used for myriad purposes in 2022 and has become an accepted and credible form of financing in later life. In the past, complaints have – with some justification – been levelled at the product. Now those have been dealt with, it would be a shame if the market suffered because of service issues from some quarters. Lenders would be well advised to listen to brokers’ views and act quickly.
Jacqueline Dewey is CEO of Smart Money People
