First steps into the growing lifetime mortgage market

Later life is less about cruises and games of bingo and more about travelling, home renovations and spending time with family.

– Marie Catch – Head of Mortgage Broker Sales at Legal & General Home Finance

Retirement is lasting longer – In the 1950s people could expect to live 5 or 10 years in retirement. Now it can last decades, putting extra pressure on pension pots that need to last longer – pots that are now much smaller after the shift to defined benefit schemes. Others face covering the cost of care too as they live into their 80s and 90s.

This growing pressure on savings is leading an ambitious generation of retirees who want to make the most of their later years to unlock the money that is tied up in their homes for a better retirement. And it’s no surprise – Britain’s over-55s now own a staggering £1 trillion in housing wealth.

Unlocking this wealth with a lifetime mortgage is becoming much more popular. Earlier this year the Equity Release Council (ERC) revealed that the lifetime mortgage market hit almost £4 billion in 2018 – up nearly 30% on the previous year. Yet many advisers – even those who currently hold the relevant equity release qualification – still haven’t engaged in this fast-growing market. Could they be missing a trick?

More choice for borrowers

A lifetime mortgage is a loan secured against a client’s home and could be a good option for a range of clients, from those struggling to fund their day-to-day expenses to others who want to free up extra cash for home renovations or holidays. In some cases, lifetime mortgages can even benefit customers who want to help their children or grandchildren buy their first home, although there may be cheaper ways to borrow money.

Some advisers might leave equity release out of client conversations because of negative reports they’ve heard in the past. Misperceptions about equity release do persist and, as an industry, we need to tackle them.

One common myth is that unlocked equity can only be taken as a lump sum, making lifetime mortgages inflexible. However, customers can now choose to enjoy the benefits of their housing wealth by accessing smaller amounts as and when they need. The latest lifetime mortgages now even offer the chance to unlock equity as a fixed, monthly income. Other options give borrowers much more flexibility if they want to make repayments too, such as Legal & General’s Optional Payment Lifetime Mortgage, which allows customers to make monthly interest repayments, free of charge.

All equity release plans approved by the ERC will benefit from the no negative equity guarantee safeguard as well. This ensures that a borrower or their estate will never owe more than the value of their home.

Creating an effective service

Advisers who are thinking about entering the lifetime mortgage market can start by working towards their equity release qualifications. These include the Certificate in Equity Release offered by the Chartered Insurance Institute (CII) and the London Institute of Banking & Finance’s Certificate in Regulated Equity Release. Lifetime mortgage providers such as Legal & General also offer free workshops and development courses to ensure continuous professional development once advisers are qualified.

Advisers today have an opportunity to help their clients navigate the nuances of these products and help them to tackle the challenging situations that retirees are increasingly facing. The growing lifetime mortgage market offers plenty of support with online resources and regular workshops, ensuring advisers’ entry into the sector is as smooth as possible.

 

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