In these unique and challenging times, the equity release sector is adapting to social distancing requirements to allow advisers and lenders to continue supporting customers. Perspectives on the impact of the virus on the sector have been mixed; many business leaders think there will be business opportunities as consumers seek new ways to raise funds, and while a survey of consumers found that many were opting either to abandon or put on hold their equity release plans, almost half of the homeowners questioned said they were planning to continue.
With the coronavirus lockdown having a major economic and social impact, it is particularly important for equity release advisers and lenders to be aware of the potential vulnerability of customers. Research has shown that in 2019, 29% of equity release customers were using funds to pay off debts and this percentage is likely to rise as over-55s borrow to ease financial pressure on themselves or loved ones. Those approaching retirement without sufficient savings may also be more vulnerable, as noted by the FCA who warned that more savers may be targeted by pension scammers.
Looking to the future, trends are emerging which could have long term significance for the equity release industry. Women appear to be altering their decisions about retirement as a result of the changes made in 2010 to raise the state pension age, with a decline in women retiring early and a 51% increase in the number of women aged 60-64 who are in work (compared to a 13% rise in the number of working men aged 60-64 since 2010.) In 2019, more women accessed single equity release plans than men, but with more women in this age group now in work than not, this may reduce or delay the numbers of women releasing equity.
There are also emerging changes in home ownership patterns, with rising house prices causing higher numbers of pensioners to rent and current levels are set to double from 5.6% to 12% by 2046, meaning higher living costs for this group. The Pensions Policy Institute (PPI) has warned that home-owning pensioners in the future will be more likely to be still be paying off their mortgages throughout retirement, in 2019 20% of equity release customers used funds to pay-off outstanding mortgages and research from the PPI suggests that this percentage will rise in future years.
Customer trends and the current health crisis suggest that greater numbers of customers will use equity release to manage financial obligations or existing mortgages, and it is becoming increasingly common for over-55s reach retirement with outstanding debts. Women over age 60 are staying in work in greater numbers than ever and it remains to be seen if this has an impact in the long-term on the numbers of women choosing to release equity. Rising house prices mean increased equity for homeowners, but this also means more over-55s will be priced out of home ownership with a knock-on effect on the equity release sector.