In the UK, the over 55s hold more than £3.5 trillion in housing wealth, driven by years of significant – occasionally double-digit – house price growth.
For homeowners, finding ways to access this value has made a significant difference in their financial capability as they reach later-life. However, for products like equity release, there have been challenges.
One of the most important areas of focus for lenders has been addressing evolving customer needs through innovation. Recognising that every customer will follow a unique retirement journey has meant adapting products to allow homeowners to access property wealth at different times, for different reasons, and in different ways.
For instance, Legal & General was at the forefront of offering drawdown, so customers only borrow what they need, when they need it, to suit their circumstances at the time. In addition to this, we were one of the first to allow customers to pay the interest on their loans through a regular monthly direct debit, which provides customers with the flexibility to manage their interest across the life of their loan.
This has proved hugely popular with customers and is now observed across the industry. It is imperative that we continue to evolve, and as lenders, regularly engage with advisers and listen to their feedback, to better understand where change is most needed.
There is always room for growth. Recently, the Equity Release Council (ERC) updated its Standards on Mandatory Payment Lifetime Mortgages. We welcomed this as it served as an endorsement of our recently-introduced Payment Term Lifetime Mortgage (PTLM), a product designed to improve the options for borrowers over 50, which we felt were not being met.
PTLM helps borrowers access property wealth earlier – from 50, rather than 55, and its affordability criteria takes into account pre-retirement income. The product offers a tax-free cash lump sum in return for fixed monthly interest repayments up until retirement, or until age 75, whichever comes first.
The ERC’s announcement is important, not only because it sends a signal to the wider industry that such innovation is welcome, but also because it gives customers more peace of mind when considering new products that might better suit their specific needs.
We need homeowners to have confidence and feel protected when taking advantage of later-life lending in order to build trust. The introduction of the Consumer Duty also reinforces a broader culture of collaboration between lenders and advisers, rooted in the delivery of good customer outcomes.
Over the last year we have seen challenges to the lifetime mortgage market, as market volatility has prompted both advisers and customers to show more caution. However, as we look to the rest of 2024, property wealth still remains a valuable asset for those looking to borrow in later life.
We expect to see customers take a renewed interest in lifetime mortgages, encouraged by a more stable market. As demand rises, it is vital that the industry continues to evolve, innovating to meet customers’ changing needs and introducing protections to give them peace-of-mind.
Craig Brown is chief executive Legal & General Home Finance
