Lenders need to focus plans for equity release innovation on schemes enabling customers to switch directly from residential mortgages into equity release, according to research from Bower Retirement Service.

Its study found 37% of advisers believe plans allowing customers to transition from mainstream mortgages directly into equity release would be the most important product development for the future.

Bower’s quarterly Adviser Tracker Research found twice as many advisers believe plans allowing retired homeowners to switch from mortgages would be more important than cutting rates.

The research found that the increasing issue of interest-only is driving the need for innovation; nearly one in three equity release customers (30%) have interest-only mortgages, advisers say.

Around 22% of their clients have already been turned down for lending in the mainstream market, the research shows.

Andrea Rozario, chief corporate officer at Bower Retirement Services, said: “The mainstream market is waking up to the demand for longer mortgage terms with leading lenders extending their maximum ages to 85.

“That highlights how the market is gradually shifting to retirement lending rather than simply being about mainstream mortgages and equity release. However customers need solutions now and equity release can play an important role.

“The interest-only issue is a major factor driving the demand for more innovation – clearly those customers can pay interest on their loans but many are struggling to find capital repayments and need products that can support them.”