Expect equity release to continue on its growth path

07 September 2017

In July, the Equity Release Council confirmed that in the second quarter of this year equity release lending topped £700 million meaning that this sector is hurtling towards being a market of over £3 billion a year.

This is even more impressive when drawdown products are now a major slice of these completions, meaning that borrowers are not taking their fully available funding on day one and are instead drawing down extra tranches of funding when they need it. This clearly means they do not pay as much interest over the term of the loan.

It is the same case as with equity release products where borrowers can make repayments to keep more equity in the property. This type of product innovation is very welcome and more innovation is undoubtedly on its way which can only benefit the borrower and the market as a whole.

Equity Release is undoubtedly becoming more mainstream and, in an environment of pension deficits, is becoming a valuable part of the discussion when undertaking retirement planning. There have been a number of new entrants over the past few years that have radicalised not only equity release products but the rates available, making the products even more attractive.

Funding is key, and, as well as new lenders, we have seen new funders coming to market to offer funding to both existing and new players. Funding is expected to increase and so realistically the market can be expected to do the same.

Where equity release is likely to be very successful will be in the area of interest-only mortgages. It is an obvious product to offer to qualifying borrowers who are coming to the end of their term with no repayment vehicles in place. Therefore lenders and intermediaries should be looking at remortgage programmes with suitable equity release lender partner(s).

Specialist data from CACI estimates there is circa £35 billion of mortgages maturing this September and October. With these sorts of levels and the potential for a proportion of these to be interest-only, equity release mortgages should be on the radar of both intermediaries and lenders’ retention strategies.

All in all, what was seen as a pretty niche product 10 to 15 years ago now have huge potential for adding real value, not only to the mortgage market but also our economy and society as a whole. Everything leads to continued growth, with new lenders, funders and distributors continuing to come to a market that has an explicit need for the product.

 

Media contact

Debbie Staveley
Director and Owner,
bClear Communications

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+44 (0)1275 542 511

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