A few weeks ago, I struggled through the snow to attend the Equity Release Council’s Later Life Lending Summit in Sheffield along with a couple of hundred other hardy souls. Run in conjunction with AMI, it was great to see a collaborative approach that was so focused on getting the best results for customers in the later life market.
One of the sessions was run by a titan of the later life market, Stuart Wilson. It was great to see him back in his new consultancy role. I always enjoy listening to his opinions and I’m sure his services will be in great demand. Stuart opened his session with some surprising words: “Somebody asked me earlier how the equity release market was doing, and I responded – it’s dead.”
Strong words indeed! He then went on to explain himself, however. While the equity release (or to put it a better way) the lifetime mortgage market has faced more than its fair share of struggles over the last couple of years, the later life lending market is booming. To put this into context, lifetime mortgages will account for around £2.3 billion worth of lending this year but the later life lending market (for borrowers over 55) will be over £20 billion. And therein lies both the challenge and the opportunity.
Around 48% of all adults in the UK are aged over 55. As a result, their needs are as diverse and complex as any other group, plus you have to a much longer view when it comes to potential effect when advising in this sector.
GREATER OPTIONS
In addition, solutions in this market have expanded considerably driven by a combination of competition, regulatory review and necessity. You can now obtain interest serviced options for lifetime mortgages, more flexible RIO products with a more sensible view being taken regarding survivor income by some lenders and mainstream repayment and interest only mortgages that will go up to age 80 and beyond.
In fact, Family Building Society would potentially let a client take an interest only mortgage up to age 94. With solutions such as these available, anyone telling clients that they are an equity release adviser or someone who only advises on lifetime mortgages for older clients is surely missing out on a wide range of solutions and potentially doing their clients a big disservice.
At the same time the merged Venn diagram of solutions is becoming ever wider with products such as Legal and General’s Hybrid lifetime mortgage helping older clients with an income to borrow more until such time as they can obtain a standard lifetime mortgage. In addition, More2Life and Just have interest service propositions which offer a considerable saving to clients in terms of the interest they must pay.
All of this bodes well for clients in terms of choice and value but only if advisers play their part and make customers aware of all of the solutions that are available to them. It is also a huge challenge for advisers. We need to make sure that we’re fully skilled up in order to be able to do this and assessing multiple similar solutions will inevitably mean more work; so how can we help ourselves?
“we owe it to clients and ourselves to show that we are considering all options for later life clients”
TOOLS AT OUR DISPOSAL
Well, we could certainly benefit from advances in technology from a sourcing and affordability perspective. Tools such as AIR’s Later Life Navigator is a great feature. Not only does it simply show customers the potential costs of different solutions, but it also protects us by giving us something concrete to show that we have explained the impact of different options to clients. Mortgage Broker Tools’ affordability calculator allows us to check affordability for RIO and standard products from a broad range of lenders without the need to complete a new calculator each time. These tools are a great start but there’s a long way to go in terms of improving processes for brokers and the customer journey.
There is still no one single product sourcing or affordability assessment solution in the market and that inevitably means repetition and information in a variety of formats for clients. That said, the industry is making great strides to this end and we owe it to clients and ourselves to show that we are considering all options for later life clients.
The future is therefore looking bright for customers and for those advisers who embrace the wider opportunities available by taking this more holistic approach to later life lending.
