Educate the public on their property wealth
Understanding your customer is rule number one in any business. In the equity release industry we have a very diverse range of customers and potential customers so it is essential that we are constantly thinking about how to improve our products and advice. The best way to do that is to ascertain what our customers really think.
At Bower Retirement we recently surveyed 988 homeowners over the age of 55 through independent research agency Consumer Intelligence to learn more about how they managed their finances in later life.
The data has been fruitful but one question returned surprising results. When asked ‘Is your property worth more than your pension?’, 56 per cent replied ‘Yes’, 20 per cent did not know and 24 per cent said ‘No’.
Perhaps at first glance these figures are not surprising but, when you take the averages nationwide, they become odd. First, the average over-55 homeowner has, according to the Equity Release Council, lived in the same property for over 17 years, having purchased it for around £100,000. Today, following year-on-year house-price inflation, this same property should be worth, on average, around £340,000.
It is strange, therefore, that nearly a quarter of the homeowners we surveyed believed their pension was worth more than their home, given that the average DC pension pot sits at around £25,000 at retirement and even the median level for private pension wealth for men and women is below £100,000. It appears that people are still greatly underestimating the value of their home.
To tackle this, everyone – from the equity release industry to the highest levels of government – must educate the public about how much property wealth they could be sitting on.
Many thousands of people are seemingly oblivious to the extra cash at their fingertips, whether through equity release, remortgaging or downsizing.
Andrea Rozario, Bower Retirement Services
Big lenders must give retirees more options
Recently, Mortgage Strategy reported on brokers’ fury over banks’ tight lending criteria for those entering or in retirement.
A term that ends at a client’s expected retirement date is sensible because a drop in income invariably occurs. But I cannot understand why a lender would not accept an application, beyond a certain age, from a client who has already retired and who has a good pension income.
Smaller local lenders are at the forefront of assisting in this area, with the likes of the Chorley and National Counties having no maximum age at expiry. It is time that other, larger lenders followed their example and gave the older generation more choice.
Be sure your regulatory ducks are in a row
In the melee around last month’s stamp duty deadline and the huge focus on those buy-to-let landlords trying to beat it, other parts of the buy-to-let sector seem to have been overlooked.
Notable among these was the introduction of the ‘consumer buy-to-let’ regime and the requirement for regulatory permission to offer advice in this part of the market. Consumer buy-to-let came about directly because of the MCD and, despite the regulator seemingly not wishing to introduce these rules, they are now part of statutory regulation, affecting what we tend to deem accidental landlords.
There appears to be teething trouble around consumer buy-to-let, with lenders declining cases because brokers have not secured the right permissions. When applying for permission, firms should select both ‘acting as a CBTL adviser’ and ‘acting as a CBTL arranger’. Holding only one of these seems to be the root of the problem.
The good news is that permissions can be amended free of charge on the FCA website. However, while the regulator is trying to process these amendments immediately, the official consideration period is six months. That said, we do not believe it should take longer than 10 days.
What it does highlight is the importance of getting all your regulatory ducks in a row to ensure you can carry out the business your clients offer you. Some clients may not be forgiving over delays if they want to get their mortgage actioned immediately.
It therefore makes sense to take all the steps necessary to ensure they have no reason to go elsewhere.
Bob Hunt, Paradigm Mortgage Services