Last month’s Budget announcement might have seemed like something of a ‘damp squib’ in terms of specific mortgage and housing market announcements – nothing on stamp duty and very few new announcements on increasing supply – but that is not to say it didn’t contain plenty which will impact on older borrowers.
It was a Budget of billions, in the sense that Rishi Sunak seemed to announce a lot of money being spent in a lot of different areas, but fundamentally not a lot of support or help in one very key area – the increased cost of living and the ‘announcement’ that inflation is likely to trend above 4% for the entirety of 2022.
For those on fixed incomes that sets something of a challenge – we will all have seen the considerable rises in petrol prices, utility bills and other goods and services in recent weeks, and when you only have a set amount of money coming into the home, you have to think very carefully about your living standards and how you continue to meet them.
In our recent Census of advisers, we asked respondents to highlight what they believe are the key drivers which are likely to fuel the need for greater levels of later life lending over the next two to three years. Number one was paying off the existing mortgage (85%), then helping family with financial needs (65%) and funding essential spending (64%).
Those last two, and the continuing impact of the pandemic, are in a way intertwined because it looks likely that the cost of living is going to keep on rising for at least 12 months, probably more. So, what are the options available to those who have to meet these increased costs with no, or little, chance of increasing their monthly income?
Of course, utilising their major asset would be an area to look at, and I suspect that there will be a greater number of potential clients who are willing to explore accessing their home’s equity as a result of what is happening in the wider economy. Naturally, this will need to be done in a way that supports their long-term as well as short-term goals but it will certainly be an option.
It’s perhaps not surprising therefore that, according to our Census, 87% of advisers say they want to become more involved in the later life lending sector. When we broke this down to mortgage advisers, that number rose to 92%, while 80% of IFAs were of the same opinion.
I think we all appreciate that saying you want to get involved in this market, and actually moving into this space, is easier said than done. We repeatedly talk about how important it is that advisers are able to offer the full range of equity release and later life lending products – just how many are able to at the moment, given the siloed nature of our market, is a moot point.
But it’s clear from this Census that advisers recognise the established demographic drivers pushing demand for later life lending, and they need to be more active in this space in order to meet the needs of these consumers. The big question is how you do it?
Our business of course is entirely set up to support advisers in this area, but we also recognise there is a need to re-engage on these issues, and to highlight the level of help that is available. The vast majority of advisers understand where the demand is coming from, and how it is likely to grow, but how do you turn that into clients and written business?
We asked advisers in the Census what they felt they needed – 52% said a marketing campaign to support customer awareness, 47% said innovation in product design, 43% said a wider range of providers, 29% said focused webinars/seminars to improve knowledge, and 28% said better digital tools.
All of this will of course help and, from the Census itself, we picked out three key themes in order to grow the later life market – rebranding away from just the equity release solution, re-education of both consumers and advisers around the full range of options available, and re-engagement to outline the progress that has been made in the sector and the support now available.
For advisers the message is they are not on their own here, but they will need to put in the work to allow them to grow their business share and reach a wider range of customers. For example, it can’t simply be the case that they offer only equity release, or only RIOs and mainstream mortgages because of their authorisation. We have to be looking at all options because different clients will be suitable for different products.
Overall, there is much to be positive about in the later life lending market, but we have to view it in the round and advise in the round. We plan to push this message far and wide, and outline the support we can provide to get advisers to the point where they cover all later life needs. The re-engagement process starts here.
Stuart Wilson is CEO at Air Group