In last month’s edition of Pure Insight we looked in detail at how the market had adapted to the changing conditions through the introduction of new processes and products. In this month’s, as a counterpoint, we’re instead looking at how customer habits have changed, both in terms of their interaction with the equity release market and ongoing pension trends.
With prediction in recent weeks suggesting that house values could fall by up to 14%, it’s perhaps little wonder that those who may have historically looked at downsizing as a potential avenue to raise funds are now reticent to do so, instead turning to later life lending to fill that financial void. It’s clear that people have started to feel the effects of the ongoing pandemic, with a 19% year-on-year increase in the number of savers accessing their pension during Q1 of this year with projections of further increases during Q2/3 as pension holders seek to shore up their finances during these unprecedented times. In addition, it’s estimated that the COVID situation has affected the retirement plans of around 3.1m people.
Looking at consumers’ interactions with later life lending, the degree to which the market has remained changeable and fluid is perhaps best illustrated by recent Knowledge Bank data, with all of the top five broker searches for equity release criteria changing between April and May. Additionally, the three leading search terms for May (’Married Couple Application in One/Single Name’, ’Flat Roofs’ and ’Lodger/Boarder/Rent a Room’) had only featured in the top five once in the two years that data had been collated. There is also a correlation between amounts borrowed and fund uses, with those borrowing the minimum amount of £10,000 likely to use the released equity to finance holidays and leisure (33%) or home improvements (30%) and those borrowing £330,000 or more would be more likely to use the funds to pay off their mortgage (39%) or refinance current lifetime mortgages (25%). As it stands, it’s currently the under-70s, who are driving the market, with a growing gulf between the popularity of lump sum and drawdown products.
However, when it comes to market relations with customers, the news has been dominated by the findings of the recent FCA probe into advice standards which not only led to an immediate review of rules by the Equity Release Council, but also a subsequent amending of its guidelines to put extra focus on vulnerable customers and those who are remortgaging. With growing numbers of people exploring equity release during the pandemic, it’s arguably more important than ever to ensure potential customers are getting the right advice when potentially looking toward a long-term product to solve a short-term problem, especially as many continue to both be misinformed about the finer points of equity release and believe many of the myths surrounding it.