The equity release market has grown dramatically in the past 12 months and numerous companies are trying to get in on the act. Lenders see a ready market of pensioners with few liquid assets but plenty of equity in their property, while insurers see an alternative asset class to gilts and bonds, as those products seem not to supply anything helpful any more.
Age Partnership is a financial advice business that is also trying to make the most of this upswing in the equity release sector.
Set up by chief executive Tim Loy and his business partner Andrew Thirkill, the company has grown rapidly in the past nine years, taking on 110 staff and seeing its salary and administration costs go through the roof.
Mr Loy said: "We aim to grow as fast as we can but at a rate we can manage. Our target for the first half of the year was more than 70 advisers over the phone and 50 face-to-face. We think the business has great growth potential. We will most likely do an IPO at some time in the next 18 to 24 months, but we have to get it ready to be at that stage and depending on what happens in the markets."
Age Partnership is fast catching up with the market leader, Key Retirement. It generates a lot of its interest through TV commercials. The majority of its advisers are based over the phone, given that the office is in Leeds, but it is developing the face-to-face side of the business in recognition that some of its clients want a more in-depth conversation.
Mr Loy said: "The equity release market is being driven by changing demographics – it wouldn't have the growth prospects without the changing demographics. We think we can move the business into providing the entire range of services – doing their LPA, their general insurance or home, dealing with your over-50 plan."
The situation has also been helped by the changing perception of equity release. As stock markets continue to be unpredictable and savings accounts offer little return, property seems to continue its unstoppable rise.
At the same time, the equity release industry has got its act together and developed its products so that the looming presence of rolled-up interest at the end of the term (when the house is sold or the policyholder goes into care) can be mitigated by being paid off earlier throughout the period of the loan or even allow for the partial repayment of capital along the way.
Low interest rates also means that with a product charging 3.9 per cent, the debt if left untouched doubles after 17 years, rather than 10 or 11 years, which was the case when the rates on these products were charging 6 per cent.
Mr Loy said: "You can stop the roll-up of interest by making regular payments of all or some of the interest, or you can make voluntary payments with no early repayment charges. If you choose not to make any capital repayments then the debt does increase. But there are not many products where you can get the rate fixed for an indefinite period.