Beyond The Numbers: Do Market Figures Reflect Consumer Attitudes To Pandemic Borrowing?

Gareth Ware - Senior Comms & Editorial Executive

Published on 10th August 2020

On paper at least, the last quarter has been a bruising time for the equity release sector. While it’s weathered the storm of the ongoing pandemic well compared to countless other industries, it’s nonetheless been somewhat constrained by both ongoing consumer uncertainty and government controls which have delayed pipeline cases.

The Key Market Monitor put the damage at a 45% quarter-on-quarter decrease in the total value of new transactions, while the number of new customers declined by 27%. The Equity Release Council’s own figures echo those findings, with both total borrowing amounts and customer numbers decreasing by 34% compared to Q1.

However, while some research continues to suggest a short-term fall in borrowing among the over-55s, there’s a lot to be optimistic and bullish about going forward. Some advisers are reporting increases of up to 50% in the number of inquiries they’re receiving in relation to equity release, while others remain positive about the wider market outlook and point to recent data being shaped by a certain degree of consumer reticence as well as delays in processing times when it comes to valuations and other elements of the procedure. Some estimate this has added 3-6 weeks onto application times, meaning that with the market already seeing an uptick in activity Q3 could potentially see an explosion in customer numbers.

The full scale of untapped market opportunity has perhaps been best highlighted by figures released by the Halifax, which highlight that in London alone there’s a combined £96bn of housing wealth (equating to over £125,000 per household) that remains available for release, with combined national housing wealth available for release among the over-55s sitting at an estimated £499bn.

That housing equity may yet be increasingly tapped into, based on current trends. Figures released by the Office for National Statistics underline the rise in those declaring themselves as retired before the age of 65, with a four-month increase of over 55,000 marking the largest increase over that period since the default retirement age was made illegal in 2010.

At the other end of the spectrum, 18% of those surveyed by Co-Op Insurance claim that the pandemic will impact their retirement plans, with a quarter of that subset admitting that they’ve been unable to retire due to their finances. With redundancies and furloughing causing people to re-evaluate their retirement plans and the likely means to fund them, could advisers’ predictions of a late-year boost come to pass, especially as there are some industries where workers were already questioning their retirement prospects pre-pandemic?

However, while there are reasons to be positive about the medium-term future of the equity release market, a point of concern for the sector should be the number of people who still don’t understand key elements of equity release – most specifically around the no negative equity guarantee. It highlights the need for the industry to work together to dispel these myths and gain consumer trust through the sharing of knowledge. Many lenders – ourselves included – provide a number of resources such as explainer videos to help bridge consumers’ knowledge gaps, and hopefully the wider industry can continue working together to improve the public’s knowledge and understanding ahead of a predicted uptake in interest and activity.

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