Firing line  

‘Advisers going into the market should think very carefully’

‘Advisers going into the market should think very carefully’

Equity release is starting to be seen as a legitimate asset in its own right, according to Nici Audhlam-Gardiner, commercial director at One Family.

She says: “We are starting to see equity release as an asset class, and investors will put it alongside other asset classes; they will look at yield, look at risk.

"Sometimes it offsets risk from other asset classes, as it can be counter cyclical.”

Such is the popularity of equity release as an asset that One Family, which was formed through the merger of Family Investments and Engage Mutual, has had numerous approaches from potential funders to create new products.

She says: “Generally, we’re seeing a lot of potential interest from different new players, ones that haven’t been in the market previously. There are quite a few people having explicit conversations with us, to see how they can get into the market.”

One Family offers a range of equity release products and mainly entered the market because it saw an opportunity for products that were not then available, namely variable rate products, with particular demand from people who did not want to keep the loan until they left their home but to pay it off in monthly instalments.

Taking out a mortgage

There are currently three instances where people want to take out an equity release mortgage: people who have interest-only mortgages and need a vehicle to pay off the capital at the end of the term; a second group for whom taking out a loan is a discretionary venture, and who want to enjoy their retirement, who might want to spend their money on home improvements; and a third group who are using the money to do some intergenerational financial planning, and use equity release to pass money on to the next generation, with help for a property deposit, for example.

Ms Audhlam-Gardiner says: “We see people in all of these groups, and that third group is small – about 10 per cent – but it’s interesting, with more Brexit uncertainty that discretionary group of people is getting a bit smaller.”

Controversial path

But equity release comes with some controversy, not least its past reputation, where people were stuck with a loan bigger than the value of the house.

While the no-negative-equity guarantee might have done much to repair the worst of the image it created, many advisers are wary about recommending it. This is because they feel ill-equipped to advise on it, and feel unsure about suggesting a client should give up some of the equity in their property, at a cost.

Ms Audhlam-Gardiner says: “I think advisers going into the market should think very carefully. There’s increasing flexibility in terms of the products available in the market. There are products that protect part of the equity.

“We’ve got some research that says the families of the customers have much less expectation of having an inheritance than they have historically, perhaps even more so than the individual who took out the product in the first place.