Robo-advice 'gaining traction' in lifetime mortgage sector

Robo-advice 'gaining traction' in lifetime mortgage sector

As digital and remote based solutions have become essential to the lifetime mortgage sector as a result of the coronavirus, robo-advice has also gained traction, according to consultancy services provider Altus.

In a paper on the impacts of Covid-19 on later life lending, the consultancy said the lifetime mortgage sector was being ‘turned on its head’, as it transitioned from the perception of face-to-face advice being key to the sector.

The research found face-to-face advice had “historically” generated the highest conversion rate in the later life lending market but new robo-advice and guidance solutions were “gaining more traction” with customers.

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Last month, research by digital retirement solutions provider Abaka and equity release adviser Key found new technology could play a significant role in helping potential customers carry out early research into equity release options, before speaking to an adviser.

In its own paper Altus predicted providers would come under growing pressure to digitise their operations so they can continue to compete. For instance, equity release lenders have recently switched to remote valuations in response to the coronavirus.

Elsewhere Chris Sykes, mortgage consultant at Private Finance, said mortgage lenders that have been quicker to adapt to remote valuations “will reap the rewards of their agility in terms of more business”.

Mr Sykes said Private Finance had already moved cases, which were on hold with lenders slower to adapt to restrictions on physical valuations, to lenders using desktop valuations.

The economic impacts on later life lending

Altus predicted the economic impact of Covid-19 on the property market, employment and income could result in a crystallisation of ‘no negative equity guarantees’ (NNEG).

Products that meet the Equity Release Council’s product standards must have a NNEG so the borrower or their estate will not owe more than the property is worth when it is sold.

The consultancy firm also said the focus of lending would likely shift “from luxury or lifestyle purchases, to immediate and recurring needs for self or close family members.”

It noted that while LTVs are likely going to be lower, providers could expect “an increasing call on drawdown facilities as customers seek to prop up retirement incomes or loved ones suffering hardship.”

Commenting on the research Aaron Strutt, product and communications director at Trinity Financial, said: “Many younger people may well have to ask their parents or grandparents for financial support and if they do not have the funds they could turn to equity release. 

“Even if prices do drop there will still be huge amounts of equity in properties and many older people will not need high loan-to-value products to access lump sums.”