The equity release sector has routinely served ‘property-rich, cash-poor’ over-55-year-olds who have benefitted from the boom in property prices that has spanned decades.
They typically use later life lending, like equity release, as a means to boost their retirement income, gift younger generations, and even for holidays or luxury items.
While ‘traditional’ equity release customers remain relevant, there is a new cohort of borrowers with wholly different needs. These individuals are dealing with the consequences of long-term economic trends that have created a very different financial reality to their parents’.
Contending with house prices that have left wage inflation in their wake, many have locked into mortgage terms that will see them needing to manage mortgage debt well into retirement. The new generation may need to think about the use of equity release products earlier to manage a smooth transition earlier to provide a more secure financial future.
The industry has shown it’s ready to adapt. Air’s Comprehensive Conversations manifesto, which now boasts over 300 signatories, is a symbol of an industry-wide commitment to offer more options and move to ‘safer tracks’ of advice delivery for those approaching later life.
It provides a response, both changing customer needs and to the challenges set by the FCA’s Consumer Duty – a call to action to put the needs of customers and positive outcomes first. Comprehensive conversations are a positive first step, but we can’t take our foot off the gas when it comes to delivering on this responsibility. Through education, innovative products and collaboration, the industry can continuously evolve in keeping with changing consumer and regulatory dynamics.
Equity release products of the future
Product innovation is essential for both lenders and advisers to serve the new cohort of customers. According to Air’s Comprehensive Conversations broker survey, 28% of advisers have highlighted a need for a greater selection of hybrid products.
More2life and Legal and General, two of the signatories to Air’s manifesto, have introduced new product options to get the ball rolling on this front. Known as Payment Term Lifetime Mortgages, these products have helped to bridge the gap between mainstream and lifetime mortgages. Needless to say, this should be just the starting point in a long line of innovative products tailored to meet ever-changing consumer needs.
Continuous education
Continuous training and knowledge acquisition will ensure both lenders and advisers not only understand the sector but also keep customer affordability at the heart of the process. Air’s manifesto aims to equip advisers with a sector understanding that allows them to put product range and affordability at the heart of conversations. As the mainstream and later life sectors move closer together, advisers will need to be proficient across both sectors to facilitate collaboration and seamless referrals – something only a commitment to continuous learning will make a reality.
Stronger together
Mortgage networks are already a central part of the industry and will play a huge role in driving forward change – whether that be through the interchange of new technology, tools, or training programmes. By encouraging further collaboration, these networks will help to ensure that industry-wide developments advance the sector forward.
The later life sector can’t afford to stand still at this crossroads. Consumer needs have irreversibly changed and the industry as a whole has a duty to evolve. Of course, it’s not a simple feat, but it comes down to three central pillars – product innovation, education and industry-wide collaboration.
