A year of creativity for equity release

The equity release industry has certainly had an adventurous year. Our advisory research has been updated a total of 54 times, compared to a fraction of this in previous years.

So when it comes to equity release, 2005 will be remembered as the year of creativity and of the interest rate.

It was a year when the Financial Services Authority showed how seriously it takes the equity release market.

It will also be remembered as a time when the number of independent financial advisers and brokers in the market fell.

It was also a year when great product innovation was offered, not only by new providers in the market – Prudential and Just Retirement – but also more established specialists, such as Bridgewater.

As far as who the winners are, it’s probably hard to say from the providers’ point-of-view. I’m sure in the early part of next year, the firms that won the greatest share of the market will let us know.

But in 2005, the real winners were consumers. On the back of terrific property price growth over the past few years, the consumer has never had it so good.

In the first quarter of 2005, the rate battle commenced, with rate adjustments on a weekly basis not uncommon. This may be normal for mainstream lending, but for the equity release market, it was a brand new experience.

So where is the consumer placed now as we enter 2006?

Drawdown products now offer flexibility at a price that finally makes it a fair proposition. This has been reflected by the rapid growth in popularity of the schemes offered by the likes of Prudential and Just Retirement.

The introduction of the first real alternatives to drawdown were also significant: a reversion product, thanks to Bridgewater, and the introduction of Norwich Union’s reversion scheme, which offers greater flexibility to clients.

In January 2005, a client borrowing 50,000 over 20 years would have owed 184,641 at the end of the period. The same loan would now cost 157,061.

Not to keep repeating myself, but heading into 2006, there are now more reasons than ever to speak to clients about equity release.

Here’s to a successful and positive 2006. While we as an industry could be content to look back on 2005 and rest on our laurels, it’s far better to look ahead, take the proverbial bull by the horns and say what a year 2006 could be.dean mirfin is business development director at Key Retirement Solutions