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As a member of the Equity Release Standards Committee, you would expect me to have much more than a passing interest in the development of the market. I have seen it grow phenomenally over the last five years. 2022 saw record activity in the Equity Release market with 93,421 new and returning customers choosing to access their property wealth via equity release products, up 23% year-on-year according to the Equity Release Council. With the total annual lending reaching £6.2bn, a new high following the 30th anniversary of voluntary regulation being introduced, the market grew a head-turning 29% from £4.8bn in 2021 and double the £3.06bn seen in 2017.
Of course, the mini budget and subsequent rise in interest rates has proved problematic and it is visible in the Q1 lending statistics of this year. December was the quietest month since before the Covid-19 pandemic as customers took stock at the end of the year, and as the new year rolled in, the evidence was clear as the volume of new and returning equity release customers active between January and March this year dipped to 16,691, down 19% from 20,597 in Q4 2022 and down 29% from 23,395 a year earlier.
The cost of debt finance in any product is impacting borrowers across the world, let alone in this market, but it seems to me that the decision of so many borrowers to turn their back on Equity Release will inevitably be a cost issue rather than one of need.
Perhaps it’s just as well as many people are not able to release equity that should fund later years or care. The Mortgage Charter raised some very real concerns among advisors that pensions will be raided to cover soaring housing costs or to alleviate broader family debt distress.
Equity Release remains a good product for the right purposes. It is employing the very asset that is central to people’s lives constructively to solve the very real problem of financing an ageing population. It may of course serve other purposes but that is the concern. There are many who will admit rising interest rates are compelling asset wealthy, but cash poor homeowners, to help relatives access cash for their own homes through lifetime mortgages.
More than ever, Equity Release requires responsible expert handling, but I believe it will return as it has so much to offer society. It is time is now too as generations of home-owners who have earned more and borrowed more during their lives understand the value of borrowing even in their later years. It also remains a significantly useful Inheritance Tax Planning tool. The pause in growth may give some in the market time to reflect on how the Equity Release process meets the conditions of Consumer Duty outcomes – a question that needs answering as it does in any other market – but it has come a long way and has a lot further to go.
James Ginley, Director of Technical Surveying, e.surv
