The over-50s in Britain currently represent a third of the population yet hold around 80% of total consumer spending power which, when allied to the fact that total housing equity among that same age group comes to a grand total that exceeds the total GDP of Italy, highlights the power that the current target audience of the equity release sector has.
It’s a situation which is in stark contrast to the generation which now increasingly represent the adult children of those most likely to take an in interest in equity release – namely millennials. With a demographic timeline that has led to many coming of age at the height (or trough?) of the economic crisis, the loss of opportunities and associated wealth – as well as the automation of many tasks – have led to many stifled both professionally and financially and have left them in a position where they’re the first generation in modern memory to wind up worse off than their parents.
This has manifested itself in a number of ways. 2013 research showed conclusively that in real terms millennials experienced median earnings that were 43% less than Generation X’ers enjoyed in 1995 at a similar point in the demographic’s development and by extension this has impacted massively in global habiting patterns among developed nations. In Japan, research conducted in 2015 showed that roughly half of millennials aged 20-29 still lived with their parents, and by 2016 multigenerational households were the primary living arrangement for the first time in modern American history.
It’s a situation that has manifested itself in Britain too, compounded by rising house prices that have even left most starter homes out of reach for most first-time buyers who in turn are increasingly reliant on inheritances and familial assistance to get onto the property ladder. This used to be something that was readily solved by downsizing but recent research has shown that those in later life are fast falling out of love with the idea and, deterred by poor housing options and overpriced property (50% surveyed last year claim they’d no longer consider it an option in later life, a year-on-year increase of 18%).
As a result, parents and grandparents admit to having to accept a lower standard of living to help provide assistance to family members with nearly one in five resigned to the fact that they’d be – or already are – worse off as a result of providing financial assistance to loved ones. Additionally 10% said they felt less financially secure, with 4% even postponing their own retirement, as a result of helping the property ownership aspirations of those dear to them.
With average contributions from over-55s households leaving them £18,000 worse off, it’s unsurprising that the later life lending sector is seeing an increase in the number of people using gifting as a primary use of the equity released through their homes (recent figures put it as high as 17%). Nonetheless while equity release could potentially provide a potential solution to those looking to help family buy property, it arguably remains an underused medium.
Could educating families as a whole about the benefits and opportunities afforded by equity release be the answer? Most in the sector will already attest that opposition to equity release comes not from those in later life, but rather those close to them. It’s already recommended that families are involved during the application process when someone takes out a new plan, so could expanding that remit to not only ensuring they’re aware of how a relative entering into equity release could affect them (i.e. inheritance etc), but could also potentially benefit them help convince sceptical family members?
Intergenerational wealth, and its distribution, is arguably entering a unique phase within British society at present and it presents a chance for the later life market to continue its recent sustained growth. However, it’s only possible if the sector gives thought to the best way to engage not only its usual target audience but also their families in an attempt to communicate equity release’s wider opportunities and benefits.
This article has been written by Pure Retirement.
Creating a successful LinkedIn group can help you build your mortgage business, share insights and build valuable connections.
As the later life market continues to grow, and with the sector going through a boom period, it's imperative that those operating within it don't lose sight of the need to provide a gold standard service to customers.
Around the core insurance benefit, Income Protection is developing into a far fuller proposition – embracing prevention, early intervention and rehabilitation services.
Retirement isn't what it used to be and the demand for guaranteed income solutions that offer both flexibility and security continues to grow.
IRESS Industry Voice provides analysis, commentary and trends from the mortgage and protection industry. The 'Innovation Generation' issue looks at what is driving innovation in financial software, and where it can go from here.
Mortgage brokers may find themselves managing a team of other brokers. Let's find out how you can deliver success and drive your team to the very best they can be.
Brokers can help guide their clients with the necessary finances in order to secure the property they want. Here are 5 key options to help investors at auction.
Landlords want mortgage brokers who are experts in Buy-to-Let mortgages. Attract their business by showing them you have in-depth knowledge of the rental market.
The equity release sector is undergoing huge growth but in order to sustain this, lenders need to innovate and adapt in line with consumer trends.
With so many homeowners looking to take on home improvement projects, we take a look at how to keep on top of the current market activity.
The 'Income Roulette' research highlights financial worries, concerns and attitudes, particularly those belonging to the 'Sandwich Generation'.
Dedicating resource to online marketing can be difficult for brokers. Here are four areas which you can focus on without having to spend a lot of time or money.