For Will Hale, the equity release sector has come a long way since the savaging financial crisis, but there is still ample room for further innovation – particularly when it comes to ‘no negative equity’ guarantee.
Mr Hale, business development director at equity release specialist Key Retirement, claims that while the safety net which ensures that customers cannot end up owing more than the value of their home is a boon for the majority, the choice of opting out of the guarantee could prove invaluable for others.
This is because the associated cost of including the guarantee is often absorbed into the proposition, resulting in inflated interest rates for customers.
He said: “I think this is an area that the industry needs to debate. I am in favour of customer choice in terms of flexibility, but only through a specialist and a robust advice process to ensure that the right products will be sold to the right customers.
“Some customers have the financial strength to be able to cope with fluctuations in house prices. In those situations, the no negative equity guarantee is perhaps a feature that they do not need, therefore it make sense to have products available where they do not have to take that.”
Historically, equity release schemes have been widely viewed as the solution of last resort because they can be an expensive and inflexible way of supplementing a lowly pensions.
But times have changed, according to Mr Hale.
Mr Hale said new entrants to the marketplace such as L&G and, more recently, OneFamily, have seen interest rates on equity release products plummet to below 5 per cent.
What is more, equity release schemes are now being heralded as a viable solution to those struggling to come up with the capital to pay off their interest-only mortgage approaching maturity.
Mr Hale said: “There may be providers that would offer people in this situation a mortgage, but if you want guarantee of tenure of the property for the rest of your life, equity release can be a solution.”
“We are finding that there are a lot of customers who have quite large properties and are of a wealthy background who want to use equity release to make a gift to children and grandchildren in life rather than in death. So they would take equity release and use it to help their grandchildren onto the property ladder or to help pay for their education.”
Key Partnerships, the referral service which provides whole-of-market solutions for advisers who are not qualified to advise on equity release, has benefited from the rapidly evolving equity release arena, according to Mr Hale.
The firm, which has notched up 7,000 registered brokers, boasts 30 per cent year-on-year growth in new enquiries and typically receives 300 of these each month. Its advisers earn, on average, £1,450 on completion of the equity release loan, he said.
Key Partnerships is part of the holding company KR Group, which also owns an annuity broker business and a specialist second-charge broker V-Loans which was acquired in late 2014.