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Known quantity

The turbulence in the mortgage market has been very much about the known unknowns – what is the real liability of the banks to debt instruments?, how many mortgage holders are finding difficulty servicing their debts?, how many will find their repayment commitments a strain? Until we know the truth on these issues, much of the rest remains speculation.

On the basis of the gloomiest forecasts, we have seen suggestions that house prices will fall significantly in the coming period but that would seem to ignore regional variations and it would also seem to ignore the undoubted demand fluctuations in respect of different property types.

What is known is that overall there is a shortage of traditional homes which is not being adequately filled by current development and it seems inevitable that there will be a continuing demand for that type of property, a level of demand that is likely to cause prices to remain fairly firm in the medium term. It seems hard to see how prices could fall by the suggested 30 per cent when the market is not over-supplied.

All this is, of course, speculation and only time will tell what will ultimately ensue.

The equity release market is, however, a different animal as in that case we are dealing with people who are not trying to get on to the housing ladder or find their way on to the next rung. These clients are at a stage when their earning potential is falling and they are looking at the equity value of their property as a means of supporting their living standards.

The market here has huge potential. It is estimated that people in the target age group have equity in their homes of over £750bn and yet the total value of equity release business last year was only £1.2bn. Those figures clearly set out the scope that exists for the market.

While life expectancy is increasing, all of us might expect to need significant care for the last four years of our lives and the cost of that care is very significant and is growing faster than normally recorded rates of inflation.

So there can be no doubt that for many people, access to equity will bring significant relief to their financial problems and it is up to the industry to ensure that we are able to respond. Better and more innovative products are being developed, and there are rum-ours of more entrants and more familiar names coming into the market.

Advisers are also playing their part, with more showing interest in becoming specialists in the market, recognising that our ageing population represents a very significant business opportunity.

Advising on and selling the product presents its own challenges, the products and the processes have to be explained and the impact of the transaction carefully assessed. That said, more and more clients are finding that the products are a solution to their particular situation.

These satisfied clients inevitably share their experiences with their friends and in this way the market grows organically.

More good news will emerge over the coming weeks when Ship will be joined by an association of solicitors specialising in this market and an identifiable group of advisers who are committed to meeting the very high standards required in this market.

Richard Fox is chief executive of the Society of Mortgage Professionals

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