The equity release market is achieving “only a fraction of its potential” despite strong recent growth, market-leading later life lending platform Air says.
Equity Release Council data shows total lending grew by 11% last year to £2.57 billion and its research with advisers found 80% expect total lending to continue growing this year and also expect the number of new customers to increase.
However, Air stresses that total lending through lifetime mortgages is just 8% of total later life lending at £25 billion, despite innovation in the products making them relevant to a substantial number of over-55s homeowners.
It says the number of new equity release customers rose by less than 1% last year demonstrating a lack of awareness among customers and advisers who are not later life lending specialists
Air is urging advisers to equip themselves with the knowledge of the full range of later life lending products and advise on those products or set up referral agreements with later life lending specialists.
Will Hale, CEO of Key Advice & Air said: “The sector is still performing at a fraction of its potential despite the very welcome growth in total lending last year and the prospect of more to come.
“Innovation in lifetime mortgages means they are very much relevant to a growing number of over-55s homeowners and their needs. However it is clear the lack of awareness among customers and advisers beyond later life lending specialists means they are not being offered lifetime mortgages,
“Given customer needs, the £25 billion value of the later life lending market should be higher and the share taken by lifetime mortgages should be higher too. The products are there but mortgage, pension and wealth advisers need to look beyond their silos and offer holistic advice – using referral relationships where appropriate to fill gaps in the scope of the advice and/or products that they offer.”
Potential growth areas include customers coming to the end of five-year fixed rate mortgage rate deals this year and facing into significantly higher monthly repayments, those looking to gift to family, including helping younger generations onto the property ladder, and people needing to boost their retirement income.
Air’s report The home belongs in the plan – Why later life lending is essential for client centred advice sets out the business realities of offering later life advice and is available to download at: https://homeintheplan.airlaterlife.co.uk/.
It outlines how the costs for adviser businesses of launching into later life lending are estimated at around £21,700 for qualifications, training, compliance, and marketing, requiring just eight cases a year to break even. Firms referring to specialists face set-up costs of around £4,500, which would mean breaking even with around three cases a year.
Air’s services include training on setting up referral pathways and business development, as well as support on qualifications. More information on Air is available from the website: https://airlaterlife.co.uk
