Equity lenders may ‘miss the boat’
Homeowner attitudes towards releasing equity in their homes is significantly changing but a new report out today argues that some mainstream lenders who have been reticent about the market may now face the risk of missing the boat.
Homeowner attitudes towards releasing equity in their homes are significantly changing in a number of ways and recent reports show a steady growth in this market. (See our recent news story Impressive growth in drawdown equity release) However a new report out today argues that some mainstream lenders who have been reticent about the market may now face the risk of missing the equity release boat.
The report from market analyst, Datamonitor estimates that the current population of 50-60 year olds holds £542.6 billion of home equity and forecasts that by the time the whole sample group is of retirement age, total home equity will be £1,425.4 billion.
Not only have homeowners aged between 50 and 60 years accumulated significant home equity but they are also willing to use their property as a source of retirement income. Their attitudes towards leaving inheritance to their children are changing too.
While one of the main barriers to older customers using the money tied up in their properties could be a feeling of guilt that the inheritance for children would be reduced, many parents today feel less of a cultural imperative to pass on their wealth. A recent study from on the equity release mortgage market, conducted on behalf of the Scottish Widow highlights that while inheritance remains an important barrier for 37% of respondents, 35% of interviewees stated that they would leave nothing to their children.
Karina Purang, financial analyst at Datamonitor and author of the report is concerned the industry is not keeping pace with this growth. “There is now more willingness among consumers to consider using property to boost retirement income due to factors such as inadequate savings and pension shortfalls,” Purang comments. “While this is a positive development for equity release mortgage market, the industry needs to ensure that consumers are getting the best quality of advice possible before making a decision. At the moment, this is an issue.”
Major mainstream lenders are yet to enter the market
With a change in consumer behaviour towards inheritance and an increased willingness in using property to boost retirement income, the equity release mortgage market holds a significant growth potential. However, up to now, the long awaited entrance of major mainstream lenders has yet to materialise.
While the higher lending risk, lack of experience and the high level of investment involved in offering equity release schemes may be putting off mainstream lenders, it would seem that they are simply waiting for the equity release mortgage market to take off.
Indeed, interviews carried out by Datamonitor within the industry suggest that given the relatively high level of effort and risks involved in offering equity release schemes and the current small size of the sector, mainstream lenders are apparently waiting for the market to pick up before investing resources.
“Consumer attitude towards inheritance and using home equity to fund retirement income is changing. This positions the equity release mortgage market as a sector with great growth potential and one where many lenders would want to be. By waiting too long, these lenders may face the risk of missing the boat,” concludes Purang.
Homeowner attitudes towards releasing equity in their homes is significantly changing but a new report out today argues that some mainstream lenders who have been reticent about the market may now face the risk of missing the boat.
Homeowner attitudes towards releasing equity in their homes are significantly changing in a number of ways and recent reports show a steady growth in this market. (See our recent news story Impressive growth in drawdown equity release) However a new report out today argues that some mainstream lenders who have been reticent about the market may now face the risk of missing the equity release boat.
The report from market analyst, Datamonitor estimates that the current population of 50-60 year olds holds £542.6 billion of home equity and forecasts that by the time the whole sample group is of retirement age, total home equity will be £1,425.4 billion.
Not only have homeowners aged between 50 and 60 years accumulated significant home equity but they are also willing to use their property as a source of retirement income. Their attitudes towards leaving inheritance to their children are changing too.
While one of the main barriers to older customers using the money tied up in their properties could be a feeling of guilt that the inheritance for children would be reduced, many parents today feel less of a cultural imperative to pass on their wealth. A recent study from on the equity release mortgage market, conducted on behalf of the Scottish Widow highlights that while inheritance remains an important barrier for 37% of respondents, 35% of interviewees stated that they would leave nothing to their children.
Karina Purang, financial analyst at Datamonitor and author of the report is concerned the industry is not keeping pace with this growth. “There is now more willingness among consumers to consider using property to boost retirement income due to factors such as inadequate savings and pension shortfalls,” Purang comments. “While this is a positive development for equity release mortgage market, the industry needs to ensure that consumers are getting the best quality of advice possible before making a decision. At the moment, this is an issue.”
Major mainstream lenders are yet to enter the market
With a change in consumer behaviour towards inheritance and an increased willingness in using property to boost retirement income, the equity release mortgage market holds a significant growth potential. However, up to now, the long awaited entrance of major mainstream lenders has yet to materialise.
While the higher lending risk, lack of experience and the high level of investment involved in offering equity release schemes may be putting off mainstream lenders, it would seem that they are simply waiting for the equity release mortgage market to take off.
Indeed, interviews carried out by Datamonitor within the industry suggest that given the relatively high level of effort and risks involved in offering equity release schemes and the current small size of the sector, mainstream lenders are apparently waiting for the market to pick up before investing resources.
“Consumer attitude towards inheritance and using home equity to fund retirement income is changing. This positions the equity release mortgage market as a sector with great growth potential and one where many lenders would want to be. By waiting too long, these lenders may face the risk of missing the boat,” concludes Purang.
posted by tony at 7:02 PM
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