"It’s clear that lenders who operate in this area place service delivery as a hugely important part of their proposition."
It’s safe to say that for many lenders and brokers who specialise in the lifetime mortgage sector, it’s been a tough few months.
Rising interest rates have made customers more cautious about borrowing, as they have been concerned about what is happening with the cost-of-living crisis and inflation. Plus, although equity release borrowers may not feel the impact of higher interest rates as quickly as standard mortgage borrowers, the effect of compound interest rolling up on the loan is greater.
In addition, in September last year, the Financial Conduct Authority (FCA) published their review of the equity release market. They looked at both financial promotions of equity release products and the suitability of advice received by consumers. As one commentator said on the publication of the FCAs findings, “It really is time to wake up and smell the ‘Consumer Duty’ coffee”.
Despite all these concerns currently surrounding the sector, we should also remember that if we as an industry can get the later life proposition right, the opportunities are huge. And the benefits to the whole residential property market from empty nesters to first-time buyers shouldn’t be underestimated.
In December 2023, the Office of National Statistics published their latest Housing Survey for 2022-2023. They found that while the overall proportion of owner occupiers remains similar to a decade ago, the proportion of outright owners is significantly higher. Since 2013-14, there have been more outright owners than mortgagers and the proportion is significantly higher still – 35% of households are outright owners and 29% are mortgagors in 2022-23.
In addition, Canada Life released their own analysis in January 2023, in which Q4 data revealed the amount of equity available to release across England, Scotland and Wales stood at £624bn. The South East had the highest value of equity available (£121bn), while homeowners in London had the greatest amount of equity available per household (£146k).
Additional data from the same provider in March 2023 found that nearly half (49%) of customers used equity release to clear an existing mortgage. Almost a third (32%) released equity to make home improvements, while a fifth (20%) used equity release to fund their day-to-day living.
Interestingly, in the latest edition of our Mortgage Lender Benchmark, lifetime lenders showed a continual increase across all service metrics compared to H1 2023, and their average as a sector was higher than all, bar one, that we measure. Therefore, it’s clear that lenders who operate in this area place service delivery as a hugely important part of their proposition.
For example, the average overall rating across all lifetime lenders was an impressive 83.62%, a 3.38% increase from H1 2023. In fact, all of the six major metrics that we use to measure lenders averaged above 80%, with ease to find lending value scoring the highest average value at 87.23%. Other notable average scores included ease to find customer eligibility (83.62%) and satisfaction with BDM (83.16%).
In our H2 2023 Mortgage Lender Benchmark, Canada Life (89.2%) were first place in the lifetime league table, with Pure Retirement (87%) and Just (86.2%) close behind.
Following the recent Bank of England base rate decision in January, it feels like we are close to turning a corner with hopes for a rate cut soon. So it’s clear from a service delivery perspective, lenders operating in the lifetime sector are ready for when the market picks up – whether we can then unlock the wider potential for the sector will remain to be seen.
