By Will Hale, CEO at Key
The equity release market has come a long way in 20 years – helping over-55s release more than £32.6 billion of property wealth via 557,000 plans.
Indeed, it is fair to describe the past 20 years as an Equity Release Revolution which is the title of the report Key recently launched based on the first comprehensive study into the experience of customers in this sector over the past 20 years.
We wanted to find out what customers thought about the market and to address historic myths and misconceptions by seeking the views of people who had actually taken out plans. Speaking to over 600 customers with more than half having taken out equity release more than five years ago highlighted some interesting themes.
Getting to the Heart of the Issue:
Advisers who have worked in equity release sector as well as those who choose to steer clear will be well aware of the criticisms. It stops people moving home, damages inheritance plans, causes family disputes and customers sometimes do not fully understand what they have entered into. However, while there are undoubtedly examples of poor outcomes in this market, as there are in all areas of financial services, the vast majority (90%) of customers we surveyed were so happy with their choice that they had already or were planning to recommend the product to friends and family – quite a ringing endorsement for these often maligned products.
In addition, 67% said it had improved their quality of life, 35% said it had improved their standard of living and 23% said it had enabled them to help family. The impact is not just financial as equity release also supports more general quality of life factors with 50% saying easing financial worries improved their wellbeing while 33% said it had allowed them to keep doing the things they enjoy.
Most have involved family in the decision with 64% saying they discussed their plans before going ahead. Among those who decided not to involve relatives 29% said it was no one else’s business – a perfectly reasonable view given the drivers behind some transactions and differences in family circumstances – while just 6% avoided the discussion because they expected opposition or worried family would feel guilty.
Moving home was also not an issue for most customers – 83% said they had never considered moving while 4% said they had successfully moved home after taking out equity release.
Advice is Key:
Customers are only able to access equity release with the support of a specialist adviser and the overwhelming message from the report is that advisers are doing an excellent job. However, this is no reason for complacency and we must all strive to do even better in what is a rapidly evolving market.
With ensuring that a client fully understands their choices being one of the most important roles of an adviser, it is gratifying that 92% of customers questioned said their adviser had explained the plan well or very well to them.
However, some customers expressed a desire for more contact throughout the duration of the loan. Our study found more than two out of five customers (42%) said they would value ongoing support from advisers. Particularly in light of the increased use of drawdown and the range of flexible options embedded into modern equity release products this is one area of potential improvement worthy of consideration across the sector. Furthermore, ongoing contact is likely to be particularly valuable in terms of supporting customers explore remortgage opportunities. In 2021, Key advisers helped remortgage customers move from an average rate of 5.1% to 3.5%. With the prevailing environment seeing rates remain low this will continue to be an opportunity for many existing equity release customers.
Continuous improvement is required to ensure that products and advice in the later life sector continue to evolve to meet the ever-changing wants and needs of customers. But this landmark survey indicates there is a lot that is being done right and advisers are central to the positive experience enjoyed by many equity release customers.