Table of Contents
Issues in the Market
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- Key issues
- Market background and definitions
- Lifetime mortgages
- Home reversion
- Regulation
- SHIP
- Taxation
- Potential Impact on state benefits
- Effect on inheritance
- Abbreviations
Insights and Opportunities
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- Improve access to independent financial advice for the less affluent
- Develop products for retirees with mortgage debt
- Encourage children to get involved in the decision-making process
- Create more awareness through customer referral programs
Market in Brief
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- Average value of loans in decline as the number of new sales rises
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- Figure 1: Total volume of equity release sales and average value of loan by SHIP members, 1997-2007
- Lifetime mortgages responsible for 93% of new equity release sales
- Rapidly ageing population expands target market
- Longer retirements but less money to fund it
- Pension provision may not be there but property wealth likely is
- Equity release market now fully regulated
- Over 20% of mortgage industry adspend was on equity release in 2007
- Trends in distribution
- Nearly half of homeowners say they would never consider equity release
- Providing an income in retirement the top reason for releasing equity
- More than a third say they had or would seek the help of an adviser
Fast Forward Trends
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- Trend: Generation Name Game
- Things are likely to get worse before they get any better… even for Baby Boomers
- Equity release to the rescue
- Trend: Totophobia
- The equity release regulation fear factor
- Will it contribute to a shortage in advisers?
- Or is it a good thing?
Internal Market Environment
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- Key Points Summary
- Steps being taken to ensure confidence
- Equity release market now fully regulated
- The important role of SHIP
- SHIP’s ‘no negative equity’ guarantee (NNEG)
- SHIP raising standards for advice
- Partnering with independent organisations
- Big high street brands still needed to boost credibility
- Government could be holding equity release back too
- Past image problems continue to haunt the market
- Negative press on sale-and-rent-back schemes is bad for business
- The FSA dishes out its first fine
- Is regulation going to scare off new firms and advisers?
- Cost and hassle of compliance
- Regulations may stoke fear of mis-selling accusations
- Potential of legal action from complicating the family inheritance
- Efforts to support intermediaries
- Concern over homeowners using equity release too early
- Equity release and IHT
Broader Market Environment
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- Key Points Summary
- Rapidly ageing population expands target market
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- Figure 2: UK population, by age band, 2008-28 (five-year intervals)
- Men leading long-term growth among over-65s
- Time spent in retirement will continue to increase
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- Figure 3: Life-expectancy projections for people aged 65, by gender, 1987-2052
- Longer retirements but less money to fund it
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- Figure 4: Average gross weekly income of pensioner units*, by age, 2005/06
- More people working past retirement age
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- Figure 5: Percentage change in economic activity, by gender and age, 2000-06
- Pension provision may not be there, but property wealth likely is
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- Figure 6: Annual house price inflation in the UK, 1995-2007
- Favourable owner-occupation rates among the elderly…
- …but the decline in housing prices will have an impact
- The cost of protection from going into negative equity
- Regional house price variation and its impact on equity release
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- Figure 7: Mix-adjusted house prices, by region, 2007
- An Irish example?
- The base rate and the market for equity release schemes
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- Figure 8: Changes in the bank base interest rate, 1998-2008
- Impact of the credit crunch
- Retirees will be more comfortable with debt
- Government attempts at damage control still not enough for many
Competitive Context
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- Key Points Summary
- Equity release alternatives
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- Figure 9: Alternative sources of retirement income
- Downsizing
- Assistance from family and friends
- Savings and investment products
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- Figure 10: Ownership of savings and investment products*, November 2007
- Safe haven savings products
- Equity-based investments
- Pension provision
- Property investing
- Other types of equity release
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- Figure 11: Value of HEW and Halifax house price percentage change year on year, 2000-07
Strengths and Weaknesses in the Market
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- Figure 12: Equity release strengths and weaknesses, May 2008
- Market strengths
- Rapidly ageing population and the decline in pension provision
- Rise in house prices over the past decade
- Equity release market now fully regulated
- Changing attitudes towards debt in retirement
- Market weaknesses
- Recent decline in housing prices
- Credit crunch preventing more big players from entering the market
- Recent bad press hurts confidence in the market
- Potential shortage in the number of qualified advisers
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Who’s Innovating?
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- Key Points Summary
- New Life Mortgages offers investment/second home equity release
- Godiva unique in eliminating Early Repayment Charges (ERCs)
- Medically underwritten equity release products
Trade Perspective
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- Market development
- How to improve the quality of advice?
- Regulation
- Distribution
- Equity release outlook for 2008 and beyond
- Will the credit crunch spread to equity release?
Market Size and Forecast
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- Key Points Summary
- Value of equity release sales creeps to a new high in 2007
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- Figure 13: Total value of new equity release sales by SHIP members, 1991-2007
- Average value of loans in decline as the number of new sales rises
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- Figure 14: Total volume of equity release sales and average value of loan by SHIP members, 1997-2007
- Forecast
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- Figure 15: Forecast of total value of equity release sales by SHIP members, by product type, 2003-13
- Factors used in the forecast
Market Segmentation
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- Key Points Summary
- Lifetime mortgages responsible for 93% of new equity release sales
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- Figure 16: Proportion of new equity release value sales by SHIP members, by type of equity release scheme, 1997-2007
- New sales of lifetime mortgages reach £1.1 billion in 2007
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- Figure 17: Total new volume and value sales and average loan amount of lifetime mortgages by SHIP members, 1997-2007
- Demand for flexible drawdown schemes driving down average loan value
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- Figure 18: Number of drawdown mortgage plans sold by SHIP members, quarterly Q4 2005-Q4 2007
- Home reversion sales have risen since 2005
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- Figure 19: Total new volume and value sales and average loan amount of home reversions by SHIP members, 1997-2007
- Prospects looking good
Market Share
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- Key Points Summary
- Competition is heating up as smaller players experience strong growth
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- Figure 20: Estimated equity release market share* 2007
- Fallout from Northern Rock still unclear
Companies and Products
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- Key Points Summary
- Big-name players slow to enter the market
- Northern Rock’s staying in the game – in its own way
- Partnerships are likely to become increasingly commonplace
- Some providers are increasing Loan-to-Values (LTV)
- NU to provide its own alternative to equity release
- Stonehaven and Pru offer innovative safeguards and increased flexibility
- Recent efforts to increase support for advisers
- Via online tools…
- …and face to face
- SHIP member Company Profiles
- Bradford & Bingley
- Bridgewater Equity Release Limited
- Bristol & West Mortgages
- Coventry Building Society
- Hodge Equity Release
- Home & Capital Trust Limited
- In Retirement Services
- Just Retirement Limited
- LV=
- more 2 life
- Mortgage Express
- National Counties Building Society
- New Life Mortgages Limited
- Northern Rock plc
- Norwich Union Equity Release Limited
- Partnership Home Loans
- Prudential
- Retirement Plus Ltd
- Standard Life Bank
- Stonehaven
- Stroud & Swindon Building Society
Brand Communication and Promotion
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- Key Points Summary
- Over 20% of mortgage industry adspend was on equity release in 2007
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- Figure 21: Advertising expenditure on mortgage products, by type of product, 2003-07
- Norwich Union continues to spend the most on advertising
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- Figure 22: Top ten equity release advertisiers, 2003-07
- Direct mail still most common form of advertising media used
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- Figure 23: Percentage of advertising expenditure, by media type, 2007
- But is direct mail really effective?
Channels to Market
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- Key Points Summary
- Close to 80% of sales generated through intermediaries in 2007
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- Figure 24: Value sales of equity release products from SHIP members, by distribution channel, 2003-07
- Volume sales via intermediaries also leap ahead
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- Figure 25: Volume sales of equity release products from SHIP members, by distribution channel, 2003-07
- More providers have invested in direct distribution
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- Figure 26: Distribution channels of SHIP members who provide equity release products, 2008
- Rising standards for advice…
- …could benefit direct sales in near term…
- …but the importance of unbiased advice will benefit IFAs in the long term
- Intermediaries are getting more support
The Consumer: Home Ownership
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- Key Points Summary
- One in four own their home outright
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- Figure 27: Home ownership, February 2008
- With age comes equity build-up
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- Figure 28: Home ownership, by gender, age, marital status and lifestage, February 2008
- Many of the less affluent may be rich in equity
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- Figure 29: Home ownership, by socio-economic group, age/socio-economic groups, working status, household income and ACORN group, February 2008
- Regional variations in home ownership
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- Figure 30: Home ownership, by TV region and supermarket usage, February 2008
- Media usage and home ownership
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- Figure 31: Home ownership, by newspaper readership, technology users and Internet usage, February 2008
The Consumer: Attitudes and Behaviour
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- Key Points Summary
- Nearly half of homeowners say they would never consider equity release
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- Figure 32: Attitudes towards the concept of equity release, February 2008
- Awareness and education vital
- Outright homeowners are most apathetic about equity release
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- Figure 33: Most popular attitudes towards the concept of equity release, by home ownership, February 2008
- Younger homeowners more open to the concept of equity release
- Awareness of equity release increases with age
- Less affluent homeowners have the greatest need for equity release…
- …but are the least likely to be aware of the product
- Londoners most open-minded about equity release
- The importance of regionality
- People in the North of England view equity release as too complicated
- Media usage and attitudes towards equity release
- Readers of popular tabloids least aware of equity release
The Consumer: Advice, and Spending Patterns
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- Key Points Summary
- Providing an income in retirement the top reason for releasing equity
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- Figure 34: Reasons for releasing equity, February 2008
- Helping the family out
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- Figure 35: Reasons for releasing equity, by home ownership, February 2008
- Interest in maintaining lifestyle increases as people approach retirement
- Lifestyle comes to the fore
- Over-65s would release equity to pay for residential or hospital care
- ABC1s want to help younger family members financially
- ABC1s show interest in using equity release for hospital care
- Cramped Londoners uninterested in making home improvements
- Anglia and Midlands homeowners more likely to use money for hospital care
- Media and uses for equity release
- Broadsheet readers most aware of how they would use equity release
- More than a third say they had or would seek the help of an adviser
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- Figure 36: Agreement with statements about arranging equity release, February 2008
- Homeowners closer to retirement more likely to seek advice
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- Figure 37: Agreement with statements about arranging equity release, by gender, age, marital status and lifestage, February 2008
- ABC1s most likely to seek specialist advice
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- Figure 38: Agreement with statements about arranging equity release, by socio-economic group, age/socio-economic group, working status, gross household income and ACORN group, February 2008
- Regional variations in going about arranging equity release
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- Figure 39: Agreement with statements about arranging equity release, by TV region and supermarket usage, February 2008
- Media usage and arranging equity release
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- Figure 40: Agreement with statements about arranging equity release, by newspaper readership, technology usage and Internet usage, February 2008
The Consumer: Further Analysis
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- Key Points Summary
- Ageing population on their way to paying off their mortgages
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- Figure 41: Key target groups for equity release products, by amount of time left on mortgage, February 2008
- Repertoire analysis
- Paying for medical care important when choosing two or more reasons for equity release
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- Figure 42: Reasons for releasing equity, by number of reasons chosen, February 2008
- Younger homeowners more likely to have multiple reasons for equity release
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- Figure 43: Number of reasons chosen for releasing equity, by gender, age, socio-economic group, age/socio-economic group, lifestage and gross annual household income, February 2008
- Some homeowners will use other resources before going to an adviser
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- Figure 44: Methods of arranging an equity release scheme, by number of methods chosen, February 2008
- Third age and wealthy homeowners will use two or methods when arranging a scheme
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- Figure 45: Number of methods chosen for releasing equity, by gender, age, socio-economic group, age/socio-economic group, lifestage and gross annual household income, February 2008
- Key target groups
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- Figure 46: Equity release key target groups, February 2008
- Over three fifths of the Positively Interested group own their home with a mortgage
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- Figure 47: Key target groups, by home ownership, February 2008
- Younger homeowners found in the Positively Interested group
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- Figure 48: Key target groups, by gender, age, socio-economic group, age/socio-economic group, lifestage and gross annual household income, February 2008
Appendix – Attitudes and Behaviour by Demographics
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- Figure 49: Most popular attitudes towards the concept of equity release, by gender, age, marital status and lifestage, February 2008
- Figure 50: Less popular attitudes towards the concept of equity release, by gender, age, marital status and lifestage, February 2008
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- Figure 51: Most popular attitudes towards the concept of equity release, by socio-economic group, age/socio-economic group, working status, gross annual household income and ACORN group, February 2008
- Figure 52: Less popular attitudes towards the concept of equity release, by socio-economic group, age/socio-economic group, working status, gross annual household income and ACORN group, February 2008
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- Figure 53: Most popular attitudes towards the concept of equity release, by TV region and supermarket usage, February 2008
- Figure 54: Less popular attitudes towards the concept of equity release, by TV region and supermarket usage, February 2008
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- Figure 55: Most popular attitudes towards the concept of equity release, by daily newspaper readership, technology usage and Internet usage, February 2008
- Figure 56: Less popular attitudes towards the concept of equity release, by daily newspaper readership, technology usage and Internet usage, February 2008
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Appendix – Advice, and Spending Patterns by Demographics
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- Figure 57: Most popular reasons for releasing equity, by gender, age, marital status and lifestage, February 2008
- Figure 58: Less popular reasons for releasing equity, by gender, age, marital status and lifestage, February 2008
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- Figure 59: Most popular reasons for releasing equity, by socio-economic group, age/socio-economic group, working status, gross annual household income and ACORN group, February 2008
- Figure 60: Less popular reasons for releasing equity, by socio-economic group, age/socio-economic group, working status, gross annual household income and ACORN group, February 2008
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- Figure 61: Most popular reasons for releasing equity, by TV region and supermarket usage, February 2008
- Figure 62: Less popular reasons for releasing equity, by TV region and supermarket usage, February 2008
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- Figure 63: Most popular reasons for releasing equity, by daily newsapaper readership, technology usage and Internet usage, February 2008
- Figure 64: Less popular reasons for releasing equity, by daily newsapaper readership, technology usage and Internet usage, February 2008
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