A strong end to 2023 can still set up recovery next year

Although the weather might imply something completely different, we are actually deep into summer. This year does feel like it’s flying by and that may be a good thing as I think lots of industries and markets will look back on 2023 as one to forget. With September just around the corner, I like to do a little stock take and review things in time for the ‘back to school’ energy that ramps up as September begins and Q4 approaches.

For the equity release market, this year has been one of scrambling and defending the huge improvements we have made over the last decade or so. The decision to upend the markets and send rates skyward last year was out of our hands, obviously. Plus, the stubbornness of inflation and the Bank of England’s commitment to the strategy of hiking rates to try and curb price increases is again something we can never control.

So, the struggles the industry is going through right now really has no connection to the commitment, success and improvements those within the lifetime mortgage arena have shown and made over the last few years. Ultimately, this storm will pass and calmer seas will be round the corner. In fact, there could be signs that the storm is already winding down.

On the wider view, inflation figures do still remain way above the government’s two percent target, however recent data does show that it may well be finally slipping downwards again. In fact, inflation dropped lower than many in the city expected as it fell down to 7.9% in June from a high of 8.7% May, despite many forecasting that it would only drop back to 8.2%.

Hopefully this will be the start of a trend as the Bank of England still pressed on with their rate rises in August, possibly because they believe that their strategy is working and that these inflation surprises are proof of that. Time will tell if they are right.

However, focusing more specifically on the equity release market there are emerging signs of positivity to be found and I think that the tail end of this year could still set up a strong 2024. According to the Equity Release Council’s most recent market statistics - required reading for anyone working in or looking to enter the lifetime mortgage universe - ‘April was the quietest month of Q2, with the number of new plans picking up in May and again in June as monthly activity reached its highest point of the year-to-date.’

2023 has still been rough and overall lending will certainly fall, but this must be seen through the prism of the wider interest rate environment and the fact that loan-to-value maximums have also come down. However, for those that have looked to access their equity in this higher rate climate, modern equity release is protecting them more than ever before.

Of the 17,028 active customers in Q2 - which was also up 2% from the previous quarter - every single new customer will have the guaranteed right to make penalty free repayments in future to manage the effect of compound interest. This right has been baked into the modern equity release industry by the Council’s newest product safeguard, and has immeasurably improved the flexibility and safety of the industry at large. Regardless of any rate increases that are totally out of our control, equity release as an industry is trying to help our customers as the primary goal.

David Burrowes, chair of the Equity Release Council, puts it well when saying, “innovations in equity release can come into their own in a higher rate environment". Despite the industry having a rough year and the successive years of growth surely due to be derailed, the modern market is becoming more and more setup to defend our customers and give them the flexibility they require, regardless of the wider rates rises and financial struggles every industry is going through.

This focus on more than just growth is something to be proud of. Of course, a bigger equity release industry with more lenders, more products and more lending is what I want to see, but this must never come at the expense of customer safety and flexibility. Overall, there are many examples and stats that show this year will be a tough one for our trade, but hiding in these figures are a number of signs that if we can end this year strongly we can still set up a recovery in 2024.