This year will be tough but equity release is here to stay

We’re flying through 2023 and yet the world remains in flux. The pandemic shook up society and even now it still feels like an out of body experience that it even happened at all. I mean,   we were actually forced to sit in our homes and stare at the wall for months, right?

Not that I was ever anti-lockdown, but looking back it did feel like we were all treated like toddlers for a while; stuck on the naughty step. And, to be honest, who knows if our version of lockdown was even the right tactic. A number of other countries took a different tack, and perhaps they have fared better in terms of health results and possibly now, financially, too. Ultimately, it will be someone smarter than I who figures out what would have been the best path to take and even they will be far too late to change the course of history.

So, here we are, more than six months since the pandemic ended - or is it even over yet? - and we are still licking our wounds. Many countries across the world seem to be teetering on the edge of recession or have plunged into one - and the UK is no different.

Inflation was spiralling for a time and the cost of living crisis continues to hammer everyone. For the housing market, things feel more than uncertain. There’s a skittish vibe within property prices and many are warning of a coming crash. But, then again, many have often done so before and no crash materialised. Everyone and their dog seemed to be sure the market would nosedive as the pandemic kicked off, but the opposite happened. In reality, nobody has a crystal ball and some level-headed thinking for the future never goes amiss.

For the equity release trade, my niche of the wider mortgage market, the path forward remains somewhat unclear. For many in the later life lending sector, the past few years have been pretty solid, when all things are considered. Whereas other folks will have you believe that the lifetime mortgage is heading for a tough old time of it. I always try to take what I hope is a balanced view.

In terms of the raw numbers, 2022 was a record year for equity release. A total of £5.58 billion was released in new lending across the country, and, according to one industry participant, the data showed that sales throughout the year were up 25%, while the total value of new equity released was up some 27%. Not too shabby, I suppose?

Well, all of this masks a real slowdown in Q4 of 2022. A dip caused, in large part at least, by the now notorious ‘mini-budget’ of the dearly departed dynamic duo of Truss and Kwarteng.

The resultant interest rate spike caused an understandable reaction from equity release lenders. Some 70% of lifetime mortgage products were subsequently withdrawn and, as such, choice of product reduced. Add to this interest rates north of 6% and the record year of 2022 could be argued as looking somewhat different to what 2023 may look like.

However, having said all this, 2023 may well not be a year of decline. Equity release is perfectly positioned to help a number of people through the cost of living crisis and potentially provide older homeowners the financial flexibility some could desperately need. This might possibly have a very positive impact on demand.

I think it’s certain that there may well be a reduction in the number of customers accessing their equity for aspirational reasons, but luckily the modern lifetime mortgage market is diverse enough to help people at both ends of the spectrum. I expect there may be a large increase in the number of people tapping into their historic housing wealth to help them meet their everyday living costs, and while this may not be the ideal situation in the long run, it should be celebrated that our product can help people in so many different ways.

As I write this, rates are slowly sliding down towards 5% again. Who knows what will happen next, last year and many years before that have taught us not to second guess these things, but I am confident that the lifetime mortgage has a vital place in later life planning for a significant amount of people.