Equity Release 

Interest-only maturities linked to equity release boom

Interest-only maturities linked to equity release boom

A major surge in demand for equity release products is likely in 2017, as the first "massive wave" of interest only mortgages reach maturity, equity release brokerage firm Key Retirement has said.

The firm's technical director Dean Mirfin said 2017/18 will mark the first year in which the endowment mortgages sold in the 1990s and early 2000s reach maturity.

In the coming year alone, he said 40,000 such mortgages would reach maturity, at least half of which could be repaid with the help of equity release.

Mr Mirfin warned that many of those holding interest only mortgages, generally of retirement age, would struggle to repay the capital, forcing many to resort to selling their home.

This, he said, could result in a massive surge in demand for equity release, pushing growth in the sector far above the current 2017 projections that it will grow by 19 per cent.

However, he said it was an "unknown" whether this would actually happen, because it was not clear how many people were aware of the existence of equity release.

He added that take-up would depend on banks and other lenders pointing their customers towards equity release, something he said the majority were not yet doing.

Last year, Key Retirement cut a deal with Santander, which saw the bank referring interest only customers to the brokerage firm for a free consultation.

He said he hope other banks and lenders would follow Santander's lead.

"You're not asking banks to offer equity release. You're saying, tell your customers that it's available and how it works," he said.

"Even doing that, even if you don't refer them to someone who does it, is a massive step forward in dealing with your interest-only customers."

He said nothing was stopping banks from doing this, adding that they "absolute do" want to offload interest only customers.

However, he said many lenders were not being responsive.

"We are talking to a lot of lenders, but there are a lot of lenders who aren't talking to us as well."

He added that lenders had a "duty of care" to inform their customers of options such as equity release that could save them selling their home. 

james.fernyhough@ft.com

Comments