View more on these topics

Phil Wickenden: Like it or not, there’s plenty of benefit in equity release

Phil WickendenWith increasing longevity and property values being what they have become, equity release could be a viable source of wealth to supplement retirement. But advisers, on average, only talk to 7 per cent of their clients about it, despite around 30 per cent having total assets under £100,000.

There are clearly challenges – both perceived and real – but if you have a position of an ageing population, insufficient pension funds and locked- up wealth in an asset like property, something has to give, right? Wrong. Two thirds of advisers expect equity release activity to remain unchanged in the coming year, with the rest expecting only a slight uplift.

Indeed, despite rising confidence among over-55s about the role their housing wealth can play to support them financially in later life (new figures from the Equity Release Council found that annual growth in 2017 reached a 15-year high), advisers still see it as a final resort, with many reluctant to advise on it at all.

Advisers accused of ‘exam collecting’ amid dearth of equity release sales

This is a problem, because independent financial advice is a key part of an equity release sales process, in that all sales must be advised.

So what are the barriers? For many advisers, there are concerns over inheritance as well as the risk of repayments and mounting debt on compounded interest. Clearly, one of the key factors is the relationship between future house price growth, the interest rate on the loan and the period for which the loan runs.

While there is some reason for caution if house prices continue to slow or even stall (as they have done in London), there is still plenty of benefit in equity release – and this goes for buy-to-let investors as well.

Old Mutual: FCA should review dropped equity release qualification

But the excuse for many advisers is that they just do not like it. And right there is the power of reputation and the challenges of overcoming all the negative connotations that still exist, but fortunately we have WikiHow – the world’s largest and best how-to manual. Step seven of their guide to overcoming a bad reputation helpfully suggests: “If you are confronted about past deeds, disregard it with a laugh and explain ‘it was just a stage I was going through’ or ‘it was a stupid part of my life I’d rather forget’.”

There you go, Equity Release Council – job done.

Phil Wickenden is managing director of Cicero Research

Recommended

Home-Houses-Different-Mortgage-Rent-700.jpg

L&G Home Finance eyes 2018 expansion past equity release

Legal & General Home Finance is set to diversify beyond offering lifetime mortgages this year, according to managing director Steve Ellis. The L&G arm has only handled lifetime mortgages since the firm entered the market by buying Newlife Home Finance in 2015. Ellis says: “This year we will be broadening out into products that are […]

1

Mortgage broker directors join SJP with new wealth management business

Two directors of a mortgage broker have set up a wealth management firm that will be part of St James’s Place. John Charcol sales director Peter Williams and marketing director Ben Larkin have  started wealth management business Firmitas Financial Services. Larkin says: “We are looking to team up with mortgage advisers and other professional introducers […]

File image of house floating on lifesaver ring

Could mortgage advice reform boost protection? 

A wider discussion around the risks of mortgage debt should increase protection sales. There is no regulatory requirement for mortgage brokers and advisers to discuss protection or go through the wider risks clients face when taking on mortgage debt. However, when advising clients on investments, various steps must be taken to ensure they are taking […]

Home-Houses-Different-Mortgage-Rent-700.jpg

Spring Statement: Chancellor earmarks more housing cash

Chancellor Philip Hammond earmarked more cash for affordable housing in his Spring Statement today. The Chancellor assigned an extra £1.7bn for affordable housing in London, equating to 26,000 new homes. Hammond said the extra cash would take the total planned affordable housing levels in London to 116,000 by the end of 2021/22. Hammond also added that […]

US election

Capital Market Notes, November 2016 David Lafferty, chief market strategist at Natixis Global Asset Management, looks at the impact on markets and portfolios since the somewhat surprising outcome of the US election. Click here

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment