It is assumed that, over time, these barriers will be overcome. But how, when and by whom remain difficult questions.The last two years have seen disappointing market growth. After more than doubling in terms of new business to over 1.1bn between 2001 and 2003, the market slowed dramatically in 2004 and has stagnated in 2005. Meanwhile, the recent Turner Report into pension provision glossed over equity release schemes, offering little government assistance. However, the market’s potential remains. After all, it is estimated by the Actuaries Profession that 45% of the retired population are home owners but have an inadequate retirement income. The same group predicts substantial growth over the next 10 years. What are the barriers to this market flourishing? On the consumer side, the attitude towards equity release schemes remains cautious. There have been market abuses in the past, while consumers are fearful of being ripped off and ending up in negative equity. In many ways, consumers are right to be cautious. The range of products is complex, there is much fine print to read, and products are still relatively expensive. A recent Financial Services Authority survey found advice from financial advisors on equity release products to be deficient, while home reversion schemes are unregulated. On the producer side, major lenders are cautious about the risks involved, particularly mortality risk. If a borrower passes away earlier or later than predicted, the lender’s revenue can be substantially reduced. Lenders also expose themselves to the risks from house price fluctuations. But there are signs these barriers might be overcome. The FSA intends to start regulating home reversion schemes, though this unlikely to start for another two years. Meanwhile, surveys show younger members of the population are more willing to consider equity release. On the supply side, more providers are entering the market, which is forcing interest rates down. According to Economic Lifestyle, the average interest rate has fallen from 7.05% to 6.87% over the last year. However, the market is only likely to flourish once more mainstream mortgage lenders become involved. They have the ability to drive rates down further and the reputation to reassure borrowers. Analysts are right to say this market has great potential, but realising this could take longer than most are predicting.
Skipton will bid goodbye to Alan Scotter and Ron McCormick as they take early retirement to focus on different business opportunities.Clocking up 45 years with the society and its group between them in a number of roles, their most recent positions have been as group commercial directors. Through their work with the society and its […]
Lloyds TSB has boosted the number of branches offering its range of Islamic financial services for the Muslim community.The Islamic current account and Islamic home finance will be available from a total of 32 branches across the country. These products are designed to meet the banking needs of Britain’s 2 million Muslims, for whom interest […]
From Ian McIver Michael Norwood’s letter (Mortgage Strategy December 5) where he asks the question “Am I an IFA?” is an interesting one. Prior to mortgage/GI regulation, my network was an IFA network and it still is. Some members did pensions, some did investments, some did both – it didn’t matter really. The broad rule […]
The last Bank of England Monetary Policy Committee decision of the year to keep rates at 4.5% didn’t take many by surprise. There had already been enough shockwaves sent through the mortgage lending and advising community with chancellor Gordon Brown’s last minute U-turn on self-invested personal pensions.
The world’s strongest currency in November was not the US dollar, despite the greenback rallying 3.5% against the euro, 8.7% against the Japanese yen and over 8.6% versus the Mexican peso and the Turkish lira up to yesterday’s close. The strongest currency last month was sterling, which had strengthened 2.2% versus even the mighty US […]
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