Equity Release: The importance of flexible solutions for flexible lives

As the world begins to open up, it bears taking the time to reflect on how the equity release market has weathered the worst of the pandemic, and where it finds itself now, as customers may be increasingly willing to start making previously deferred financial decisions.

The most recent figures from the ERC show that a total of £1.14bn was released in Q1, which represents a 7% year-on-year increase from the same period in 2020. The market also saw roughly 3,000 more total customers (i.e. both new customers, and returning drawdown and further advance customers) served than during the first lockdown in Q2 2020, and that includes factoring existing customers’ reluctance to access reserves on drawdown plans. In fact, activity for returning drawdown customers was at its lowest point for the past four years – though it should be noted that nearly 60% of customers are taking out drawdown plans over a lump sum equivalent.

ERC show that a total of £1.14bn was released in Q1, which represents a 7% year-on-year increase from the same period in 2020.

While last year saw an understandable dip in activity levels, the equity release sector unequivocally demonstrated its resilience throughout 2020 and beyond.

The Q1 factors from the Equity Release Council support ongoing green shoots of recovery in spite of tightened lockdown restrictions and future uncertainty about the viability of traditionally popular uses of funds, such as holiday and car purchases.

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We’re also seeing increasing loan sizes, with the first instalment of a drawdown mortgage now sitting at just under £90,000, with average lump sum plans reaching just over £123,000. This can be attributed to a number of factors, including consumers making the most of rising house prices to access greater amounts, typical small-release lifestyle purchases such as holiday and cars dropping off markedly (affecting the average figures), greater interest from those with more valuable homes, and a greater focus on typical high-value fund uses such as debt repayment and gifting (the latter proving to be especially prevalent amid the ongoing Stamp Duty holiday).

But just as quickly as the landscape has changed over the last 15 months, it can change just as easily again. With recent events having demonstrated to customers just how changeable the world can be, they are doubtless looking not only for increased flexibility in their products to allow them to manage them whatever their needs in the future, but also for products which give them the confidence that they are (or can be) tailored specifically to their circumstances.

We’re also seeing increasing loan sizes, with the first instalment of a drawdown mortgage now sitting at just under £90,000, with average lump sum plans reaching just over £123,000

The later life sector has undoubtedly weathered a difficult period far better than other sectors (both financial and beyond), but now faces a new challenge: that of winning customer confidence and continuing to innovate to offer products that both provide flexibility throughout the loan term, but also the peace of mind of being individually tailored to customers’ specific needs.

The lifetime mortgage sector now offers a greater number of products than ever before - but as impressive as that is, it means nothing if they’re unattractive or unsuitable for customers.

As a result, it’s imperative we continue to understand our customers and provide effective solutions that meet their requirements today, tomorrow, and in the future.

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Blog post written by Pure Retirement - pureretirement.co.uk