"Yes, our industry is protecting our customers more than ever and new safeguards are being launched all the time, but does the man on the street know this?"
For my little corner of the wider mortgage industry - equity release - protecting our customers is even more essential as we are dealing with older and sometimes vulnerable clients and their biggest asset: their property.
Over the years, equity release has evolved and improved from what I will call a less than ideal situation into today’s modern and solid market. The lifetime mortgage in 2022 can be beautifully tailored to so many customers' needs and we should be hitting record lending once again very soon, but again at the heart of everything must be customer protection.
The most notable customer safeguard in equity release is one all people within the industry should already be very familiar with - the no negative equity guarantee. This customer protection has been vital in helping to shed the skin of the past and allowing our industry to grow into its new life. However, beyond this central safeguard, the industry has continually kicked on and developed new levels of protection that continually bolster the industry as a whole, especially recently.
This year, the Equity Release Council launched its newest safeguard, namely the right for every customer to be able to make penalty-free repayments. Another big step forward for the industry and now our customers are guaranteed more flexibility than ever before.
So, things are good, right? Yes, I think equity release is in a better place now than it has ever been and now that we have seen out the pandemic I think these next few years will be ones of immense growth. And yet, you know there’s a ‘but’ coming, don’t you? And there is. Yes, our industry is protecting our customers more than ever and new safeguards are being launched all the time, but does the man on the street know this?
Well, according to some recent research from an industry participant a massive amount of our customers do not know what the no negative equity guarantee is. 71% of the 1,001 homeowners aged over 55 that were surveyed responded that they did know what the safeguard means. This is troubling. Have we created an echo chamber for ourselves?
Now, it’s obvious that advisers and those of us inside equity release will be more clued up than our clients. The entire industry of advice may be in trouble if that wasn’t the case, but nearly three quarters of people not knowing what the biggest and most vital safeguard means is undoubtedly a problem. So how do we fix this?
Well, the first step is PR. Equity release, as I have mentioned, has come a long way in the past 20 years or so. But we need the average Joe’s opinion to be more 2022 and less 2002. I think right now, a lot of those who don’t understand the no negative equity guarantee also fear the opposite: that they will lose their house by using our products.
Reversing this fallacy is one of the keys to unlocking the potential of equity release. I know that the lifetime mortgage is ideally placed to help thousands of homeowners up and down the country achieve the retirement they want, but right now it appears, they simply do not know the reality of today’s products and safeguards.
Over the years, a lot of this has been down to scare stories in the mainstream press but I feel this is changing. Flipping through the Sunday papers, less and less do I see equity release written off out of hand. In fact, I haven’t seen the classic ‘grandad blew the inheritance on a speedboat’ story for some years now. Such progress!
But, in all seriousness, this should be the start of a change in perception, but with way over half not understanding a basic safeguard at the heart of equity release, we clearly have a long way to go. And the responsibility must lie with all of us, too.
One thing I think we can do better at it - and this goes for lots if not all financial industries - is clarity. Too often our products, safeguards and the jargon we use is dense and complicated for new, and indeed existing, clients. Let’s simplify to keep things safe.
Essentially, equity release is in a good place but we need to make sure we are breaking this echo chamber down. It’s no good patting ourselves on the back if the man on the street still does not really understand the safeguards around equity release. It is so important to get the message across to the wider public in simple terms that will breed confidence and widen understanding. This is something the industry has to tackle from a broader perspective.
