The CML’s latest research says: “Underlying demographics and pension shortfalls continue to point strongly towards a strong equity-release market.”
It points to the number of potential users, the potential demand for cashing in assets to support pensions and high expectations of the build-up of equity holdings in housing assets. But it also suggests there is a collective view that the equity-release market has “underperformed against what appear to be strong fundamentals that should drive significant annual growth”.
It puts the industry’s steady, rather than spectacular, growth down to “reputational issues associated with an earlier generation of equityrelease products”.
The report also identifies “wariness on the part of consumers about equity release as a proposition, especially when viewed by older, and typically more cautious, households”.
On the plus side, demographics are clearly to the advantage of equity release, with the proportion of the population aged 65 and over projected to increase from 16 per cent in 2006 to 22 per cent by 2031.
Home and Capital Development director Simon Little says: “It is a golden age for equity release. The next generation of baby boomers are coming through, a generation who have been conducting business using credit for the last 40 years.”
He says these people were in their early 20s when the first credit cards were introduced in 1966 and have been happily using credit since. Little says: “They have only been trickling into retirement and we expect a massive upsurge over the next 10 years.”
There has been an increase in the number of advisers taking accredited exams to offer equity release. Almost 3,000 people have taken either the ifs certificate in regulated equity release (Cerer) qualification or the Cerer top-up since April last year.
But ifs head of financial regulation Mark Roberts says: “The ifs School of Finance has seen a steady increase in the numbers taking our equity-release qualifications in recent months but nothing meteoric.”
Informed Choice managing director Martin Bamford says: “There are not enough IFAs offering advice on equity-release schemes. It is a fairly complex financial service. Advisers need to take into account all kinds of personal and situational factors, such as Government benefits, that can have an impact on the decision to take out a scheme and it is known to be inflexible and expensive.”
CML spokeswoman Sarah Robson recognises that a lack of advisers willing to offer equity release is contributing to equity release failing to achieve its potential. In 2005, the CML published Good Practice Notes on the Lifetime Mortgage Sales Process to help IFAs demystify equity release.
But Thameside director Tom Kean says: “It is a negative area of business to be involved in and it is motivated by desperation, which is why I would prefer not to be part of it. My own perception is that it is not a very lucrative field. There have got to be easier ways to make money.”
Little says: “There needs to be a significant increase in educating consumers and IFAs. Equity release has been living in the shadow of a bad press.”
Two international markets frequently quoted as successful models for the British equity release market are the US and Australia.
The CML’s report’s author Peter Williams points to Australia’s relatively mature equity-release market, saying that high levels of home-ownership, a government pension crisis in the 1980s, and a lowered desire to bequeath assets have made Australians more confident about taking out equity release – or home-reversion scheme as they are known there.
In the US, home equity schemes are doing good business. Home equity loans, which account for 90 per cent of reverse mortgages in US, had their fourth-best monthly performance on record in January 2007.