Equity release has adapted to consumer needs

This article is part of
Guide to later life lending

Potential lifeline?

But with the Covid-19 pandemic having left many homeowners financially worse off, advisers may begin to field more questions from clients about the viability of equity release to release some much-needed funds.

“There is no doubt that equity release can offer a lifeline to people who are struggling to repay their mortgage, need help meeting day-to-day expenses, or who want to support their families,” Dave Harris, chief executive of more2life, suggests.

“That said, we are very aware that in the current environment clients may be more vulnerable and as a lender [we] have introduced additional checks and balances to ensure that clients are making smart sustainable choices that work for them both in the long and short term.”

The pandemic will have knocked many people’s financial plans, Mr Gray adds.

“Although pensioners receiving fixed incomes tend to be more resilient and may have ended up spending less,” he notes.

“It’s likely we will see lifetime mortgages continue helping a growing number of people meet a range of needs, from refinancing debts, to providing a retirement income boost, to paying for holidays and home improvements, and for tax-efficient gifting to family.”

At the same time, the lockdown has proved challenging for lenders, which have been forced to adapt their processes quickly in order to keep operating.

Regulatory developments

While there are more flexible repayment options for equity release customers now, advisers will still want to ensure the product is right for their client in the first instance and that all other avenues have been explored before going down this route.

On average, HUB Financial Solutions only recommends equity release to one out of two customers after initial meetings with them.

“As part of the initial fact-find, we complete a thorough review of the customer’s eligibility for state benefits and this often reveals people can claim hundreds, or even thousands, of pounds of extra cash without needing to release equity,” he explains.

Later life lending is a specialist area and some advisers will not be qualified to offer advice or guidance about equity release.

The financial watchdog is already on high alert when it comes to the quality of advice given about lifetime mortgages.

On June 17 this year, the Financial Conduct Authority published the results of a review into the equity release market which revealed mixed results, including instances where the personal circumstances of clients were not always taken into account by advisers.

It is set to conduct a more detailed, follow-up review of advice in the lifetime mortgage market.

More2life’s Mr Harris says: “In cases where advisers feel that equity release might be a viable financial solution for their clients but are not qualified in this area, they should refer cases to specialists.”