The equity release boom shows no signs of abating and is raising the question of whether the rapid growth in demand could lead to there being too few advisers adequately qualified and trained to assist clients.
According to Dean Mirfin, technical director for equity release specialist Key Retirement, some advisers do not feel confident about selling the product, because it might not be something they regularly advise on.
Mr Mirfin said: “If you are only doing the odd case every now and then, knowledge decay will set in. As a result a lot of firms have no interest because they will end up with really bad knowledge decay and they don’t want to risk it.
“The number of specialist advisers in the equity release sector has increased considerably over the last couple of years and it is continuing to grow at a good pace. A step change is needed, but it is not just a question of adviser numbers.
“It is also about the number of advisers who engage with consumers at all levels on the subject of releasing money from their home. This is where we believe the wider need is.”
Commenting on customer demand for equity release, Tracey Lucas, an equity release adviser from Needham Mortgage Centre, said: “Going forward, people might struggle to find an adviser.”
To address this, some advisers who are not confident about equity release or do not have the appropriate qualification are referring their clients to other specialist advisers.
By the end of the year Key Retirement predicts the amount of money pensioners will be borrowing from their home to pay debts and fund home improvements will hit £3bn, compared to £2.1bn in 2016.
Total sales of equity release plans grew 44 per cent to 17,656 in the first half of 2017, compared to 12,246 in the same period in 2016, while total property wealth climbed to £1.246bn from £934.378m.
Across the country all regions saw an increase in the number of plans sold and the value of property wealth released, according to Key Retirement’s half-year equity release market monitor.
As the demand is growing, what has also emerged is the changing manner in which older borrowers are spending their equity release money.
As well as repaying interest-only mortgages, they are also using the money to help their grandchildren pay university fees or get on the mortgage ladder.
When it comes to non-mortgage debts, older borrowers are using the money to repay car finance bills, which has raised the question of whether equity release funds are being used in an appropriate way.
Harris Independent Financial Advice director Matthew Harris said: “Equity release might be necessary in some situations, but in most cases it is not really needed. I don’t think people understand how much the debt will build up over time and that it could lead to them not being able to hand over their homes to their children.”
However, Ms Lucas said: “Sometimes it is the only way that people can consolidate debts because they have not been able to cope with paying bills.”
Highclere Financial Services partner Alan Lakey said: “Somebody who has no relatives to leave money or assets to may wish to enjoy life while still fit and healthy and the option of borrowing money that has to be repaid every month may not appeal, or even be available.”
This demand in equity release is highlighting the changing needs of older borrowers and the need for lenders to be more flexible with their products.
As a result, the Council of Mortgage Lenders is calling on the market to adopt a more joined-up approach to delivering advice to older borrowers and to narrow the gap between mainstream lifetime mortgage advice silos.
A forthcoming FCA review later this year is also expected to look at what lenders can do to help borrowers whose interest-only mortgages are nearing the end of their term.
Ima Jackson-Obot is features writer at Financial Adviser
