Table of Contents
Issues in the Market
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- Key issues
- Market definitions
- Lifetime mortgages
- Home reversion schemes
- Abbreviations
Insights and Opportunities
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- Baby Boomer attitudes should begin to shape outlook of industry
- Consumer awareness high but level of trust low
- Mortgage relationships could present opportunities for equity release
- Increasing numbers of people look for assurance of expert advice
- Marketing to focus on issues with inheritances and education costs
Market in Brief
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- Demographic and economic trends favourable for equity release market
- Regulation prompts equity release market to review sales standards
- Flexible products increase appeal of equity release schemes
- Industry concerned over consumer access to quality advice
- Drawdown mortgages boost sales but impact overall market value
- Equity release market dominated by three providers
- Direct sales channels expected to account for more business
- 'A quarter of homeowners can be classed as equity-rich
- One in ten homeowners have released equity from their home
- Funding home improvements is most popular reason to release equity
- One in six consumers regard equity release schemes as ‘rather dodgy’
Fast Forward Trends
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- Trend 1: Downhill SKIing
- Definition
- Context
- What Next?
- Trend 2: Trust in Me
- Definition
- Context
- What Next?
- Trend 3: Pay Attention
- Definition
- Context
- What Next?
Broader Market Environment
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- Key points summary:
- Ageing population increases the target market
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- Figure 1: UK population forecasts, by age, 2007-27
- Long-term growth trends vary in gender and age bands
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- Figure 2: Analysis of UK population over 65, by gender and age, 2007-74
- Life-expectancy will continue to rise
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- Figure 3: Life-expectancy projections for people aged 65, by gender, 1987-2052
- Longer retirements place mounting strain on finance
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- Figure 4: Average gross weekly income of pensioner units, by age, 2004/05
- Attempts to close the savings gap – too little, too late for many
- Extending working lives to boost pensions
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- Figure 5: Economic activity rates as a percentage of population, by gender and age, average for 2006
- More people are working over the age of retirement
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- Figure 6: Percentage change in econonic activity, by age, 2000-06
- House price rises increase wealth held in property
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- Figure 7: Average house prices in UK, 1970-2006
- Recent rate rises could impact the attraction of equity release schemes
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- Figure 8: The Bank of England’s base rate, January 1991-January 2007
- A housing slowdown would represent a major threat
- Desire for home ownership continues to increase
- A growing proportion of owner-occupiers
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- Figure 9: Rates of owner-occupancy in housing stock, 1991-2011
- Figure 10: Owner-occupation rates, by age, 2005
- Influence of mainstream mortgage market on equity release sector
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- Figure 11: Total number of mortgages outstanding (at year end), 1997-2006
- Figure 12: Total mortgage debt and annual growth rates, 1986-2006
- House prices influence MEW
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- Figure 13: Value of MEW and Halifax house price percentage change year on year, 2000-06
- Changing attitudes towards property?
Internal Market Environment
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- Key points summary:
- Equity release – the development of a niche market
- Providers wary of accusations of mis-selling
- The steadying role of SHIP
- The implications of NNEG
- The legacy of a ‘shady past’
- Building links with outside bodies
- Regulation provides a boost for the reputation of the industry…
- …although sales have seen a short-term dip
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- Figure 14: Annual lifetime mortgage sales, 2002-06
- Home reversion schemes to be regulated from 2007
- Expected impact of home reversion regulation
- Mystery shops reveal issues…
- …to which SHIP has responded
- Signs of improvement
- Equity release as a tool for inheritance tax planning?
- Entry of mainstream providers into the market
- Companies increasing customer base through affinity partnerships
Competitive Context
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- Key points summary:
- Alternatives to equity release
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- Figure 15: Alternative sources of retirement income
- Downsizing/selling property
- Reliance on family assistance
- Pensions
- Investments in property
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- Figure 16: Buy-to-let mortgages outstanding, 2001-06
- Other forms of equity release
Strengths and Weaknesses in the Market
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- Figure 17: Equity release market, strengths and weaknesses, 2007
- Demographic and economic factors enlarge target market
- Product development breathes new life into equity release
- Industry develops safeguards to prevent ‘history repeating’
- Legacy of past reputation still hangs over industry
- Lack of advisers could hold back sales
- Regulation could cause a hiccup in the home reversion market
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Who’s Innovating?
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- Key points summary:
- Consumers demand increased flexibility with drawdown products
- Home reversion schemes also embrace flexible options
- ‘Protected Share’ enables people to reduce impact on inheritances
- Providers looking to increase access to higher LTVs
- Providers begin to offer a more diverse product range
- Equity release support tools drive technological advancements
- Use of Internet in equity release sector growing
Trade Perspective
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- Many in industry predict modest growth over next two years
- Equity release expected to develop as retirement planning option
- Consumer confidence and access to advice are main barriers to growth
- Government policy and attitudes towards inheritance also impact development
- Future looks bright for direct sales with entrance of high street brands
- Size of equity release market has deterred mainstream providers
- Mainstream providers to raise consumer awareness of equity release
- Lifetime mortgage regulation has deterred advisers working in sector
- However, most acknowledge regulation vital for consumer confidence
- Home reversion regulation welcomed as will create level playing field
- Future of equity release depends on maintaining consumer confidence
Market Size and Forecast
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- Key points summary:
- Value of equity release sales has faltered
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- Figure 18: Total value of equity release sales by SHIP members, 1991-2006
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- Figure 19: Number of plans in force at year end, by SHIP members, 2003-06
- Popularity of drawdown mortgages provides a boost for market…
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- Figure 20: Number of drawdown mortgage plans sold by SHIP members, quarterly 2005-06
- …but results in lower loan amounts
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- Figure 21: Newly advanced lifetime mortgages, by number, value and average amount of advance, 2002-06
- Institute of Actuaries looking for growth in the sector
- Steady growth forecast
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- Figure 22: Forecast of total value of equity release sales by SHIP members, by product type, 2006-12
- Factors used in the forecast
Market Segmentation
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- Lifetime mortgages continue to dominate equity release sales
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- Figure 23: Value of equity release sales by SHIP members, by type of equity release scheme, 1991-2006
- Some sign of a revival in the reversion sector
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- Figure 24: Total value of equity release sales by SHIP members, by product type, 1996-2006
- Number of plans sold increases by 14% in 2006
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- Figure 25: Number of equity release plans sold by SHIP members, 1997-2006
Market Share
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- Key points summary:
- Equity release dominated by three major providers
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- Figure 26: Estimated equity release market share, 2006
- Norwich Union looks to intermediary sector for boost
- Companies explore new strategies to develop market share
- IFAs choose Northern Rock as preferred lender
- Concerns expressed over dominance of Key Retirement Solutions
Companies and Products
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- Key points summary:
- Bridgewater Equity Release Limited
- Bristol & West Mortgages
- Ecclesiastical Life Limited
- GE Life Limited – recently rebranded as Tomorrow
- Hodge Equity Release
- Home & Capital Trust Limited
- In Retirement Services
- Just Retirement Limited
- Key Retirement Solutions
- Mortgage Express
- National Counties Building Society
- New Life Mortgages Limited
- Northern Rock plc
- Norwich Union Equity Release Limited
- Partnership Home Loans
- Portman Building Society
- Prudential
- Retirement Plus Ltd
- Standard Life Bank
- Stonehaven
- Stroud & Swindon Building Society
- Other equity release providers
Brand Communication and Promotion
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- Key points summary:
- Advertising and promotion vital to improving consumer confidence
- Advertising opportunities limited by lack of mainstream providers
- £64 million spent advertising equity release schemes in the last five years
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- Figure 27: Advertising expenditure on equity release products, by organisation, 2002/03-2006/07
- Norwich Union accounts for almost half of total advertising spend
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- Figure 28: Advertising expenditure on equity release products, by top ten providers in 2006/07
- Direct mail is the most popular form of advertising equity release schemes
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- Figure 29: Percentage of advertising expenditure, by media outlet, 2006/07
Channels to Market
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- Key points summary:
- Distribution patterns evolve
- Over 60% of equity release sales generated from intermediary market
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- Figure 30: Value of equity release sales by SHIP members, by distribution channel, 2003-06
- Some signs of a recovery for direct sales in equity release
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- Figure 31: Volume sales of equity release products from SHIP members, by distribution channel, 2003-06
- FSA findings highlight need for specialist advice in equity release market
- Equity release industry expresses concern over access to advice
- New providers have an impact on the market
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- Figure 32: Distribution channels of SHIP members who provide equity release products, 2007
- Adviser numbers grow but future depends on maintaining confidence
Consumer Financial Activity
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- Testing times for financial services providers
- Activity levels down again
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- Figure 33: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2005-December 2006
- UK savings and spending climate
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- Figure 34: UK savings and spending climate – indexed, January 2001-January 2007
- Subdued picture across all sub-groups
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- Figure 35: Expected financial activity, by socio-demographic and income groups, December 2006 and average for the last 20 quarters
- Declining business across the board
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- Figure 36: Leading financial activities planned in the next six months, December 2005-December 2006
- Mortgage providers may have to work harder for revenue
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- Figure 37: Intended mortgage and property purchase activity, December 2004-December 2006
- Identifying main financial services providers
- Abbey customers are the most ‘fairly’ active
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- Figure 38: Activity levels of main financial services providers’ customer bases, December 2006
- Halifax customers are savers
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- Figure 39: Activity intentions and current household financial situation, by MFSP, December 2006
The Consumer – Mortgage Ownership
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- Key points summary:
- Survey background
- A quarter of consumers own their home outright
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- Figure 40: Housing tenure, February 2007
- Implications and opportunities
- Mortgage debt is being pushed later into life
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- Figure 41: Housing tenure, by gender, age and socio-economic group, February 2007
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- Figure 42: Changes in housing tenure, by age group, 2003-07
- Implications and opportunities
- Nearly half C2DE 55+ group could be termed equity-rich
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- Figure 43: Housing tenure, by lifestage, age/socio-economic group and working status, February 2007
- Implications and opportunities
- Highest levels of home ownership recorded in the South of England
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- Figure 44: Housing tenure, by gross annual household income, TV region and ACORN category, February 2007
- Implications and opportunities
- 70% of people who shop at M&S and Waitrose are homeowners
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- Figure 45: Housing tenure, by newspaper readership, technology users, commercial TV viewing and supermarket usage, February 2007
- Implications and opportunities
The Consumer – Market Potential
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- Key points summary:
- One in ten homeowners have released equity from their home
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- Figure 46: Willingness to release property equity, 2003-07
- Implications and opportunities
- People aged 25-44 most likely to have released equity
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- Figure 47: Willingness to release property equity, by gender, age, socio-economic group and marital status, February 2007
- Implications and opportunities
- 20% of homeowners in ABC1 35-54 group may consider equity release
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- Figure 48: Willingness to release property equity, by lifestage, age/socio-economic group and working status, February 2007
- Implications and opportunities
- A third of homeowners in the South receptive to idea of equity release
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- Figure 49: Willingness to release property equity, by gross annual household income, region and ACORN category, February 2007
- Implications and opportunities
- Mid-market tabloid readers less likely to consider equity release
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- Figure 50: Willingness to release property equity, by newspaper readership, technology users, commercial TV viewing and supermarket usage, February 2007
- Implications and opportunities
- People who own their home outright least likely to release equity
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- Figure 51: Willingness to release property equity, by housing tenure, February 2007
- Implications and opportunities
- CHAID analysis
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- Figure 52: CHAID analysis on select statements relating to equity release schemes, February 2007
The Consumer – Attitudes and Targeting Opportunities
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- Key points summary:
- Most common reason to release equity remains home improvements
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- Figure 53: Reasons for releasing equity, February 2007
- Implications and opportunities
- Younger people more likely to release equity for home improvements
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- Figure 54: Reasons for releasing equity, by gender, age, socio-economic group and lifestage, February 2007
- Implications and opportunities
- People looking to release equity for retirement read mid-market tabloids
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- Figure 55: Reasons for releasing equity, by newspaper readership, technology users, commercial TV viewing and supermarket usage, February 2007
- Implications and opportunities
- Repertoire analysis reveals home improvements are a key driver
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- Figure 56: Repertoire on Q12 main reasons for releasing or considering to release equity, February 2007
- One in six homeowners view equity release as rather ‘dodgy’
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- Figure 57: Agreement with statements about equity release schemes, February 2007
- Implications and opportunities
- A quarter of homeowners over 65 decided against equity release
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- Figure 58: Agreement with statements about equity release schemes, by gender, age, socio-economic group and marital status, February 2007
- Implications and opportunities
- ABC1s most likely to seek expert financial advice
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- Figure 59: Agreement with statements about equity release schemes, by lifestage, age/socio-economic group and working status, February 2007
- Implications and opportunities
- One in five Waitrose shoppers plan to leave home as inheritance
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- Figure 60: Agreement with statements about equity release schemes, by newspaper readership, technology users, commercial TV viewing and supermarket usage, February 2007
- Implications and opportunities
- Two thirds of consumers are disinterested in equity release schemes
- Seeking Expertise (15% of respondents)
- Undiscerning (67% of respondents)
- Low Opinion Prospects (9% of respondents)
- Other Options (8% of respondents)
- ABs most likely to be Seeking Expertise
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- Figure 61: Typologies according to attitudinal statements about equity release schemes, by gender, age, socio-economic group and lifestage, February 2007
- Readers of popular tabloids most likely to be Undiscerning
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- Figure 62: Typologies according to attitudinal statements about equity release schemes, by newspaper readership, technology users, commercial TV viewing and supermarket usage, February 2007
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