The rise in UK individuals releasing some of the value of their home could see it start to rival the pension freedoms as a key tool to fund their retirement, according to Legal & General Home Finance.
This comes after the sector’s trade body, the Equity Release Council, released its stats for 2018, which saw lending hit a record £3.94bn ($5.16bn, €4.57bn).
Rob Miles, head of adviser sales at L&G Home Finance, told International Adviser: “Lifetime mortgages have clearly moved into the mainstream of retirement planning.
“Changes in the way people live in retirement, the decline of final salary pensions and more providers […] entering this sector have all helped to raise awareness about the positive role lifetime mortgages can play in later life.”
It is important to note, however, that there is a slight risk that boosting your capital or income through equity release may mean you lose some, or all, of your state benefits.
Growing quickly
The £3.94bn of equity release lending in 2018 compares to £7.83bn taken via pensions freedoms in the same year.
While total use of the pension freedoms is currently greater than equity release, it is the latter that is winning the growth race.
Since the introduction of pension freedoms in April 2015, the market has grown by an average of 0.71% each quarter.
Rising to £1.9bn in Q4 2018 from £1.77bn in Q2 2016, according to government statistics cited by Aviva.
Over the same period, equity release has grown by an average of 7.1% each quarter – more than doubling to £1.08bn in Q4 2018 from £51m Q2 2016, according to the insurance and savings provider.
Technological innovation
“If the industry is to continue growing at this rate, it will be essential [for providers] to listen to advisers about what their clients want and need from later life products,” Dave Harris, chief executive at equity release lender More 2 Life, told IA. “However, it’s not only product innovation which will be important for industry growth.
“As demand for equity release rises, the sector must also invest in new technology to keep up and deliver the level of service that today’s retirees expect.
“Delivering quick processes, expanding our product offerings and providing user-friendly accessible solutions for borrowers, will stand us in good stead for maintaining the robust growth we have seen in recent years.”
L&G’s Miles added: “This rapid growth is creating new opportunities for wealth advisers to step to the fore by helping their clients to make best use of all their assets, including their property wealth, so that they can enjoy the retirement they want.”
