Equity release and retirement income only (RIO) mortgages were on course for significant increases before the onset of the Covid-19 pandemic, with a growing proportion of advisers expecting later life lending to become their principal income source, a new report has found.
The report, from Best Advice Intelligence, a sister publication of Corporate Adviser, found the average lifetime mortgage in 2019 was £67,050, while the average RIO mortgage in 2019 stood at £84,688. The report found 36 per cent of mortgage advisers polled expected the majority of their revenue to come from later life lending, prior to lockdown.
The report found L&G is the largest lifetime mortgage lender to disclose its figures, followed by More2Life and Aviva. The lifetime mortgage market is gaining significant traction with six providers now having a book of business that exceeds £300m
Best Advice Intelligence identified a wide variety in the average loan to value (LTV) of lifetime mortgage providers, ranging from 39.7 per cent to 16 per cent. Just Group has the highest LTV at 39.7 per cent
The report found 70 per cent of equity release providers now offer inheritance protection or ring-fencing guarantees.
It identified a wide range in provider turnaround times, with Aviva and More2Life reporting an average of nine working days, compared to LV= with 56 days
Rate is the most important factor cited by advisers when recommending a later life product
Best Advice editor Kevin Rose says: “intermediaries have access to a later life lending market which is more competitive than ever.
“The landscape in the UK is one of reduced DB pensions, a lower state pension and increased longevity. The Equity Release Council has revealed that older home owners are seeing an average shortfall of almost £18,000 between the annual retirement income they expect to need and the amount they are likely to receive. At the same time, analysis from Savills puts the total value of all homes in the UK at £7.29 trillion. Property wealth will therefore undoubtedly continue to play a role in helping meet the range of needs of the UK’s ageing population.
“The data shows that while later life lending remains a small part of the overall mortgage sector, an increasing number of advisers are getting involved in it, and, before the Covid-19 crisis struck, a growing number were planning to start advising on it.”