Equity release sector is likely to experience landmark events in 2016
For equity release, 2016 may be a year to remember.
When measuring the success of something, we often point to landmarks, events and single points in time that signalled the upward trend. Other equity release commentators and I heralded the annual lending figures breaking the £1bn barrier in 2014 as a benchmark – a bar we must set ourselves every year and one that we have surpassed every year since.
Another landmark could arguably be the dip below 5 per cent in annual interest rate that we have sporadically seen over the past year or two. Although rates are not consistently sub-5 per cent, products such as L&G’s Premier Flexible Drawdown, the first 4.99 per cent drawdown product on the market, represent a landmark moment that, hopefully, will represent further decreasing rates and therefore more affordable products for our clients.
Looking ahead, I can sense another landmark moment in the offing. With the FCA now seriously reviewing barriers to competition within the mortgage market, the possibility of upheaval within affordability criteria grows ever larger.
If, and it remains just an if, the FCA does decide that affordability criteria need a serious alteration, more lifetime mortgage customers could take the option of making sizeable interest payments before switching to roll-up, thus reducing the overall cost of their lifetime mortgage.
What is more, if affordability rules are relaxed, we could see more heavy-hitting high-street lenders join the market. The impact of well-known providers such as L&G entering the equity release space has the effect of increasing confidence among our customers and gives them the thing they want more than anything: choice.
2016 could be another landmark year for equity release, and we may very well look back to the events of this year as answers to the reason why the lifetime mortgage became ever more involved in the retirement planning of the wider population.
Andrea Rozario, Bower Retirement Services
Lenders must get behind government initiatives to help homeownership
The Government’s desire to help Britain return to being a nation of homeowners is an admirable one, especially in the face of so many challenges. Whether income related or on a regional basis, many obstacles continue to present themselves to potential homebuyers of all ages.
The gap between income and house prices is inevitably at its widest in London, which is one of the reasons why Barclays is committed to supporting the new London Help to Buy initiative.
However, it is not only those in and around the capital – particularly people looking to purchase on their own – who are struggling to get themselves on the property ladder.
A recent report from Savills suggests that a median-priced property is now no longer affordable for median-earning solo buyers in 95 per cent of local authorities across England and Wales. In fact, there are said to be just 16 locations that remain affordable, largely clustered in the north of England and in Wales.
These are startling statistics and in many of these unaffordable regions the situation is also reported to be not much better for two people on a median salary.
We hear much about Generation Rent and the potential shifts in lifestyle choices and attitudes towards homeownership. But the question is – is a lack of options behind this state of affairs, rather than a new mindset?
It would be too sweeping a statement to say yes or no either way. That said, it is fair to say that much of the younger generation expect to rent for longer than previous generations did.
On the other side of the coin, judging by the demand we and other lenders have experienced in recent times, it certainly appears that homeownership remains a strong aspiration for the majority.
This demand also underlines the importance of government initiatives, and how lenders need to get behind them and endeavour to find responsible, innovative solutions of their own to help tackle this ever-growing problem.
Tony Fullbrook, Barclays Mortgages