But when looking at the possible reasons for this, we shouldn’t analyse the downward trend in simple isolation. To do this would be like saying we’ve had a cold January and February this year therefore climate change is not a cause for concern any more.
The truth for the equity release market is that the UK’s retired population are a unique customer segment, who, when presented with economic uncertainty could bury their heads in the sand and hope the problems go away. And let’s be honest there are plenty of economic problems facing the retired now that would give anyone cause to settle into a ‘safe place’ and try to ignore what is happening.
It is an oft-used phrase but today there is something of a ‘perfect storm of problems which the retired are being forced to confront including savings rates at an all time low, annuity rates falling, share dividends (particularly the banking sector) tumbling, rising food inflation, council tax increases, not forgetting fuel poverty and rising medical costs. There is much there to contend with.
On the other hand, however, many in their retirement will not be saddled with a mortgage and will have significant amounts of equity at their disposal. It is estimated in the UK there is over £750bn of equity tied up in property owned by the over 65s. You would think therefore that retired homeowners would be queuing up to seek advice on equity release. And yet they’re not.
Why is this? Well we need to think carefully about the psychology of elderly consumers. When faced with a tidal wave of bad news (either in the media or dropping through their letterboxes in brown envelopes) some people tackle the problem head on, while others can freeze and take no action at all.
For some retired people the latter approach can often be the default setting and this will obviously store up problems further down the line.
However, the situation is often not as bad for the retired as for others. During a recession I can fully understand someone of my generation (forty-something with four kids) putting off a holiday of a lifetime, or long-needed home improvements or buying a new car, until there is some light at the end of the economic tunnel.
But for many retired homeowners with no mortgage there is no reason to put off the things they have promised themselves after a long working career. The fact is if they are using equity release there is no need to put off these lifestyle purchases.
So, like climate change, the inevitable expansion of the equity release market will happen despite some short-term indicators to the contrary. There is a huge amount of latent, pent-up demand that will eventually feed through to the advisory sector.
The challenge for advisers right now is to reach out to the target audience of retired/soon to be retired customers and educate them about how equity release works, the benefits of today’s flexible Ship-registered products and the protection of regulation. With this educational approach, putting the head in the sand should never be an option.
Peter Welch is head of sales and distribution at Bridgewater Equity Release