The financial landscape is ever-evolving, and recent months have witnessed substantial changes in customer needs and adviser behaviour within the later life advisory sector. Advise Wise has closely monitored these shifts to better understand the evolving dynamics of the market. From altered customer objectives to fluctuations in equity release rates, the industry is undergoing notable transformations.
Changing customer objectives
In the period spanning from the pre-mini budget to the present, we have witnessed a significant transformation in customer objectives. Previously, customers often sought equity release for discretionary purposes such as purchasing new cars, going on holidays, or making home improvements. However, there has been a noticeable shift towards needs-based objectives, primarily focused on repaying mortgages and consolidating debt. This change highlights a growing emphasis on financial security and debt management among customers in later life.
Increase in maximum release percentage
One intriguing trend that has emerged is the rise in customers looking to release the maximum amount possible. Prior to the mini-budget period, this percentage stood at 43.5%. However, by April 2022, it had surged to 61.2%. This upward trajectory suggests that customers are increasingly seeking to unlock more funds through equity release to meet their financial goals. Whether it be supporting their retirement, covering unexpected expenses, or providing assistance to their loved ones, this trend showcases the growing importance of unlocking the full potential of equity release for customers.
Changes in average amount and future reserve facility
While the demand for releasing the maximum has grown, changes in the lifetime mortgage market have impacted the average amount available to customers.
The average amount has decreased from £142,318 to £118,001, representing a decline of 17%. This reduction is primarily attributed to the higher rates and reduced loan-to-values available in the market. Moreover, the average future reserve facility, which acts as a buffer for customers, has also experienced a decline from £71,574 to £65,932, down by 8%.
These changes signify the evolving dynamics of equity release products and their associated benefits.
Fluctuating equity release rates
Equity release rates have been subject to fluctuations in line with mortgage rates. Prior to the mini-budget, average fixed-for-life equity release rates were in the range of 3-4%. However, in the immediate aftermath of the budget changes, these rates surged to 8%.
Fortunately, we have seen a subsequent decrease, with rates now stabilising around the 6% mark tracking only slightly above two-year mortgage fixed rates despite having the security of a fixed rate for life. This volatility emphasises the importance of staying updated with the latest rates and market conditions, ensuring that both advisers and customers make informed decisions regarding equity release products.
High customer demand and emphasis on quality
Despite the changes mentioned above, customer demand within the later life sector remains strong. Advise Wise has experienced a 31% increase in product research requests, indicating that advisers are actively seeking information and guidance on behalf of their clients.
Furthermore, our advanced sourcing filters have been utilised 29% more frequently, demonstrating a commitment to enhancing advice quality by tailoring the product sourcing to the client’s needs and ultimately achieving better customer outcomes. These statistics highlight the importance of reliable sourcing platforms in assisting advisers.
