BLOG: Appreciating The Wider Landscape

The levels of equity release customer lending have remained consistent year-on-year, hovering around the £3.9bn mark in both 2018 and 2019 and underlining the market’s recent growth (with total lending up from £945.9m in 2009) and current stability. This is in the context of wider shifts in the retirement landscape, with some consumers finding it more difficult to live on state and private pensions during retirement.

Research from the Equity Release Council (ERC) and Key Retirement has shown a mismatch in the retirement expectations of average older homeowners, who expect they will need an annual income in retirement of £35,196 to cover their individual needs - over twice the real average income of a single retiree of £17,212. However not all of those approaching retirement are in a position to increase their pension savings, with surveys of over-55 homeowners reporting that many are not able to increase their pension savings due to financial pressures including the cost of living, mortgage repayments, financial dependents and lower earnings.

At the same time, consumer attitudes to housing wealth are shifting, with the total number of equity release customers reaching a record high of 85,497 in 2019 and researchers at the London School of Economics reporting that accessing housing wealth as part of long term financial planning is becoming mainstream. Equity release customers are using funds for a mixture of uses, including helping to cover day-to-day living costs as well as home improvements and holidays, and with current house prices suggesting that the average homeowner in England and Wales would be able to access around £88,290 in equity (and downsizing falling out of favour with 28% of over-55 homeowners) equity release looks like a logical solution for many.

Following the ERC’s recent position that “a single-product solution to retirement planning is no longer fit for purpose,” the equity release sector is in a strong position to build on its success over the past decade and actively educate both advisers and customers on the role lifetime mortgages can play within holistic multi-product retirement solutions. Arguably this is an opportunity still to be fully explored by the wider later life financial sector, with research finding that of older homeowners who have sought information, guidance or advice on later life finances, only 19% were prompted to consider accessing property wealth to boost their income.

At Pure, we recognise how the retirement landscape is shifting away from single, one-size-fits-all product solutions, as well as the flexibility which is needed by customers to meet their financial requirements in retirement. Our Classic range, recently widened in distribution, is designed to allow customers to adapt their plans as their needs change. Customers have access to an uncapped drawdown facility (subject to maximum LTV), in addition to the option to make up to 12 ERC-free repayments per year providing they don’t exceed 10% of the initial amount borrowed in a 12 month period.

As the equity release market has grown, it has become both competitive and flexible with providers offering a wider range of products at increasingly low rates, which fell to a record average low of 4.91% in September 2019. Indeed, our own Classic range recently launched its lowest ever MER of 2.55% on a fixed-rate product, providing a cost-effective way for our customers to access the retirement they deserve in a way which suits their increasingly varied needs and circumstances.

The changes external to equity release in the wider retirement sector suggest that customers will increasingly be using a combination of several product solutions to fund their retirement. As such it is key for providers to offer lifetime mortgage products based on an understanding of the wide ranging needs of customers, as opposed to operating on the assumption that one size will fit all. At Pure Retirement, we are committed to delivering a flexible range of products, and we are interested to see how the market as a whole will rise to the challenge of providing later life financial solutions which are fit for purpose.

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