The evolution of later life lending products is not always properly recognised by the media and industry experts, according to Key chief executive Will Hale.
Speaking to FTAdviser, Hale said later life lending products are no longer "the product of last resort" that they have historically been labelled as.
He argued that we are currently "seeing the emergence of later life lending being a much more normalised approach to retirement for people".
The equity release industry has had to work to improve its reputation, which took a knock in the 1980s and 1990s amid a number of scandals, leaving people with large amounts of debt, he explained.
However, the market has just had its largest half year since records began with £3.43bn worth of borrowing, according to Key's latest market monitor.
This increase has been fuelled by new customers but also by customers borrowing more.
The average equity release customer took out 6 per cent more in the first half of this year than they did in the same period last year, with the average amount borrowed sitting at £100,468.
A significant amount of this growth can be attributed to people using equity release to meet pressing needs like mortgage and debt repayments.
The first half of this year saw 40 per cent of people use equity release products for mortgage repayments compared to 29 per cent for the previous period.
Meanwhile, Key also noted a big jump in people using equity release products for discretionary or leisure spending with the amount of people using equity release for holidays doubling to 12 per cent versus 6 per cent the previous year.
Whether this trend will continue is difficult to read in Hale’s view, amid the current rate of inflation and cost of living pressures many are facing.
“Undoubtedly, for a segment of customers, they're going to be tightening their belts, and making more cautious decisions about some of those discretionary spend items,” Hale said.
“But it's important to recognise there's a cohort of customers who probably aren't feeling the pinch quite as much. So my gut says, we will probably see a slight downturn in borrowing for discretionary spending but I don't think it will disappear completely.”
Retirement
According to the Global Retirement Index, 2022 could be the "most challenging year to retire in recent history", as the economic environment affects people's pension savings negatively.
In Hale’s view, housing wealth can be a major solution to this.
Since pandemic restrictions have eased globally, Hale has said more retirees are looking to realise some of their hopes and dreams that they had put on pause and accessing housing wealth has allowed them to do this.
But equity release products still face scrutiny from the regulator and advisers often still approach with caution and scepticism.
In August, advisers warned the Financial Conduct Authority that it needs to change how it regulates equity release products.
This followed a warning from the FCA earlier this year that it is going to follow up on a previous review of the market to make sure it is working in the best interest of consumers.
While the products themselves are not the main issue, it is the quality of the advice given alongside their purchase which is worrying the industry.
“That's where things like, our internal mortgage desk is important, “ Hale said. “If we don't believe equity release is the right solution for a customer then we're not leaving them without a solution, we are still helping them fulfil their needs.”
He added: “The industry is really trying to get his head around this evolution to a broader later life lending landscape where equity release is just one of a range of solutions."
Hale said noted that there is still a lot of work to be done by the industry and "potentially policymakers and regulators".
"That's why cultural aspects of consumer duty are really important. Because, yes, as a firm, we concentrate on equity release, and that's the driver. But ultimately, we want to do the right thing for customers.
"The business long term will only survive if put heart in everything we do, we want to provide the right outcome for our customers. Our tagline is that ‘if equity release isn't right for you, we will tell you’, and that is a principle that we hold very dear."
jane.matthews@ft.com
