"Spreading simple truths and information needs to continue be a major goal for our industry over the coming years."
How do you improve a business? Sure, you can look to double down on your strengths and make sure that everything you do well is always at the front of your mind, but what’s also important is looking at how you are perceived from a wide audience.
For the equity release industry, and all financial products and markets to be fair, we should be looking to take on board negative opinions and viewpoints and see how we can evolve to meet these criticisms head on. We have had a huge amount of growth and modernisation in the last few decades, but does the man on the street know this? Are they equipped with the up-to-date information they need before they meet with an adviser? Whist we have, without doubt had far more positive coverage over the years there is still an element of the same old lines trotted out in some of the mainstream media.
The one criticism we still hear more often than any other about equity release is that it’s expensive and should only ever be used as a last resort. Usually, I wonder how a financial product that demands no immediate monthly repayment while simultaneously delivering cash injections at what are usually, vital moments, with numerous safeguards and flexibility cannot be measured on its positive elements in a more consistent, fair and balanced way, but that’s another piece for another time. However, many people, and some tabloid journalists especially, continue to have a disparaging view of the lifetime mortgage.
We do see some positive articles in the mainstream press and this is a great leap forward and there are many in the industry, not to mention the Equity Release Council that are helping to educate the media and the public, but this is an ongoing job and helping people to understand the extent of the changes in the market and the flexibility built into the products over the last decade alone, is going to take perseverance.
Today’s equity release market is a totally different animal to the one I first got involved with over 20 years ago. The choice available, the flexibility offered and the general knowledge and talent of those involved in this industry has grown immensely. However, beyond these improvements there are some real tangible changes that have been made in our industry that I think every potential customer approaching their retirement should be made aware of.
One of these changes is something that most equity release naysayers forget to mention, and that’s the power of regular interest rate repayments; a right that is now baked into every new equity release product thanks to the Equity Release Council’s most recent customer safeguard.
This evolution is making equity release more flexible and a less costly endeavour for many customers. For example, research from one member of the industry shows the power of paying back even small sums of interest through the life of the loan. In their example, a customer with a £400,000 property and no mortgage takes out an £82,000 lifetime mortgage at an average 6.65% interest. If they were to simply allow the interest to build up over time - something they are well within their rights to do - they could be left with £163,066 some 16 years later. However, were they to make a regular payment of just £100 the remaining equity in the property would increase to £197,161 - or rather £34,000 extra equity, of course what happens to the value of the property over the term, in this example 16 years, will also have an impact on the equity left.
If you told the average member of the general public this, would they have been aware of this flexibility that modern equity release provides? I doubt it. And that, ultimately, is on us. We, as an industry and a service that can potentially help thousands of people get the retirement they deserve, need to be better at educating people on the realities of the lifetime mortgage in 2023, both the pros and the cons. No small task but essential all the same.
It seems to me that the average person’s knowledge level on equity release is probably five or maybe even ten years out of date. It’s unreasonable to expect the average Joe to understand every complexity and nuance of an often complex product, but spreading simple truths and information needs to continue be a major goal for our industry over the coming years.
The older population will continue to swell as people live longer, but all the while everything seems to be more expensive and finances across society are stretched thin. So, it is likely that equity release is going to have an increasingly important role to play.
Knowledge is power and building on the positive press, educating those journalists who are not up to date and trying to ensure consistent, fair and accurate coverage, will help towards people having all the tools they need to make the best decision they can, when it’s right for them.
