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Equity Release:a rapidly growing market
offering new opportunities for
customers and advisersJuly 2016
2
Introductions• Will Hale• Business Development Director• Key Retirement
• The UK’s No.1 independent equity release specialist
• Over 18 years experience in the specialist sector of retirement financial services
• 35% market share of UK equity release distribution
• Won over 50 industry and consumer awards over the past 10 years
• Over 80 employed advisers providing nationwide face-to-face advice• A referral proposition for intermediaries
• Ensuring customer access to the best advice on equity release products
3
Equity ReleaseA rapidly growing market offering new opportunities for customers and advisers
• The potential• Growth of the market and new growth drivers
• The basics• What is equity release
• The opportunities• Popular uses for equity release and identifying
potential clients• Reasons to refer• Benefits of referring to the right partner
• Summary
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The potential
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The PotentialA rapidly growing market
Sources: Key Retirement Market Monitor Report, H1 2016
Market on track to exceed £2 billion for the first time
Equity Release Market rose by 24% to £934 million in the first half of 2016
Total property wealth increased by £181 million
Total number of plans grew by 11%
Average customer boosted income by £76,300
Current market - £1.4bnOrganic growth - £5bn by 2020 £17bn Cumulative IO Mortgages - £3bn annually 2017-2032Pension reforms,HNW clients,holistic plansHybrid products &innovation
6
The potentialPension reforms and innovation – new funders required
77
The potentialTicking time bomb of interest-only mortgages
64,000 people will have an interest-
only mortgage maturing
Every year a minimum ofwill have an average shortfall
of £56,200£1.7 billion
in potential lending each year
49% of these
to clear their debt, however that leaves74%who want to stay in their current property
26% will sell or downsize
Sources: Experian Analysis & Gfk Consumer Research, May 2013
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UndecidedHome improvements
HolidaysRe-invest in ISA'sLiving expenses
1818
2323
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The potentialPensioners with unprecedented control of their pension pots• 55+ savers plans for their retirement funds:
46% 31% 23%Take several smaller lump
sums
Take it as one lump sum
A regular income of
similar amounts• Spending intentions (top 5):
• Should property wealth also be considered when evaluating retirement finances?
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The potentialAging population with substantial property wealth
Over 11.4 million homeowners aged 55 or over
18% of all aggregated household property wealth worth £820 billion
65% have lived in their current property for at least 20 years
House prices are now x45 their 1970s level
Expected to grow by 5.5m between 2010 & 2030
Reaching a predicted £1.2 trillion in 2020
Almost half have no plans to downsize
Number forecast to rise every year from 2016 to 2020
Source: L&G Last Time Buyers Report, June 2015
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The basics
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The basicsLifetime mortgages and home reversion
CURRENT EQUITY RELEASE MARKET
Lifetime Mortgages(interest roll-up schemes)
Home Reversion(sell a % of your
home)
Lump Sum Drawdown Up to 100%
Max Cash / Enhanced Interest Payment
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The basicsLifetime mortgages
Lifetime mortgages
1. Max Cash/Lump Sum(standard and enhanced)
2. Drawdown(standard and enhanced) 3. Interest PaymentType
Typicaluses
Repaying existing debt and special one-off purchases
Smaller one-off purchases and expenses
Refinancing existing interest-only mortgages where
customer can service interest payments
LTV range 13% - 55.5% (enhanced) 13% - 55.5% (enhanced)
Interest rates
2.96% variable monthly (capped at 7.72%)4.88% - 7.30% fixed (enhanced)
5.04% - 7.30% (enhanced)
Source: more 2 life market data
Providers
1313
The basicsRecent product innovations
Higher LTVs for clients with medical conditions/lifestyle issues that could affect life
expectancy
Enhanced Plans Similar to those often found in the residential market, as
opposed to gilt-based ERCs (Mark to Market)
Fixed ERCs
Options for programmed repayment of interest and also voluntary ‘flexi-repayment’
options
Interest Payment
Sources: Experian Analysis & Gfk Consumer Research, May 2013
14
FUTURE RETIREMENT LENDING MARKET
The basicsMeeting client needs – filling the gaps
Index Linked Hybrid Products
RPI/CPI Income producing
Traditional Lifetime Mortgages
Lump Sum Drawdown
Max cash/enhanced Interest Served
Interest Served and roll-up completed
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The basics
It’s too expensive!• The current lowest equity release interest rate is 2.96% (variable monthly)
The interest build up will leave me with no equity• It may do - but house prices could increase over the same period too leaving more equity
I won’t own my own home any more• With a lifetime mortgage the client retains 100% ownership of the property
I’ll be forced to sell my house• The property will only be sold once clients have died or moved into long term care
I’ll leave my family with my debts• Beneficiaries are never left in any debt with the plans Key recommend
Challenging common misconceptions
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The basicsHPI versus interest roll-up
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The opportunities
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The opportunitiesPopular uses for equity release
65%•Home and/ or garden improvements
29%•Pay debts (e.g. loans, credit cards)
29%•Go on holiday
24%•Treat or help family or friends
22%•Clear outstanding mortgage
13%•Help with regular bills
Sources: Key Retirement Market Monitor Report, H1 2016
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The opportunitiesPopular uses for equity release
• Home and/ or garden improvements• Consistently the number one use for some/ all of funds
raised• Interest-only mortgage maturities• 2016 is seeing the start of the first major wave which
the FCA and lenders alike are most concerned about• Mortgage repayment has grown as a usage for equity
release more than any other• The ‘Bank of Mum and Dad’• Set to be involved in 25% of all mortgage transactions
this year• Collective lending from this source is equivalent to a
top ten mortgage lender• Record pensioner property wealth• Grown by £9.24 billion this year along, to £926 billion
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The opportunitiesLending into later life is a newsworthy ‘hot topic’
2121
The potentialEmerging trends
If you have clients who have a property worth less than
the house they want to move to
Wanting to move home Equity release could allow your client to ‘buy out’ their
partner
Going through a divorce
An option for clients interest in buying a second property, holiday home or motorhome
Buying a second home
Sources: Experian Analysis & Gfk Consumer Research, May 2013
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Reasons to refer
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Reasons to referUse your time wisely and reduce your exposure to risk Key Partnerships guarantee
to be up to date with all new products, providers and innovationsto search the whole of the market to find the best plan for
your client
to keep you regularly updated throughout the process
access to special offers and preferential terms
to take full compliance responsibility for the advice we provide
Generous commission paid on completion – average of £1,452 in 2015
24
Reasons to referThe referral process
Refer
• your client to Key Partnerships via phone, email, web or paper
Relax
• while Key find the best deal for your client and take them through the process, keeping you constantly updated
Receive
• your commission : the average commission paid for each completed case is £1,452!
• Is simple
In 2015, 79% of Key Partners earned an average of £1,452 in commission.
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Summary
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Equity releaseA rapidly growing market offering new opportunities for customers and advisers
The equity release market
is growingMore
competition and choice
Widening appeal
Specialist knowledge is paramountMore plans
and innovative products
Constantly changing market
Work with the
UK’s No.1Be able to
offer equity release
Refer your clients to the best
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Thank you0845 121 [email protected]
www.keypartnerships.co.uk
www.twitter.com/keypartnerships
For intermediary use only
Key Partnerships