Consumer interest in the later life lending sector has been steadily increasing over the past 10 years, with more than 19,000 plans taken out in the first half of 2020 compared to just over 10,000 in the first half of 2010, according to data from Key.
Additionally, with pension saving not keeping up with life expectancy and significant numbers of people finding that their home - which has risen in value over the past 20 years - is their largest asset, more people are considering how they can use their housing equity to support their needs and wants in retirement.
So how have equity release products become more flexible in recent years and what is driving the increased competition among lenders?
Will Hale, chief executive at Key, says over the past decade, lenders have responded to the changing needs of customers and advisers and delivered significant product innovations.
Currently, there are more than 400 products on the market as opposed to 144 just two years ago, adding flexibility for those considering equity release.
Historically, interest on equity release plans would roll up and be added to the balance to be repaid when the house was sold by the customer or their estate, or when the customer moved into long-term care.
Now, customers can choose to make monthly repayments, no repayments at all, or make flexible payments.
Mr Hale adds: “An ever more diverse range of customers are exploring late-life lending options,but as a sector we are better able to put solutions in place to meet individual needs and circumstances than ever before.”
It’s fair to say that the equity release market continues to evolve and adapt to changing customer needs, but this also brings an element of complexity around product selection for advisers.
Interestingly, the available product options now exceed 300, a 42 per cent increase in the last year as reported by the Equity Release Council in their April 2020 report. In recent years,
Georgina Oxton, strategic sales manager at LV, says the lender has seen changing trends in the way customers are leveraging their property to supplement their retirement income.
Ms Oxton adds: "Today’s equity release customer is a lot more focused on planning for the future and having control over their finances. Naturally, this means flexible product options are the preferred route.
"Customers would like to have the option to control interest roll-up if they choose to and flexibility varies widely from lender to lender. When designing our new Lifetime Mortgage Drawdown+ product we reviewed the market context.
"We understand that customer circumstances can change and we therefore prefer to offer flexibility so they can vary both the amount and frequency of any interest repayments."
Changing customer attitudes
Paula Steele, director at John Lamb Hill Oldridge, believes the popularity of equity release has also grown because clients are more open to equity release as one strategy they can use to meet their objectives.
She says: “They feel it is a valid option which it wasn’t previously. Low interest rates help, and also the growth in property prices has been so large that some think they can spend some of it.