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Look forward forward to the year ahead. Many in the market and see' approach to major financial decisions.
It is armed with the knowl- may be seeking a 'return to normality' but we Obviously, this option is only available to those
edge of what has gone must now consider what 'normal' actually is - who can afford to wait a little longer; many will
before us that getting back to a normal market situation does want to act swiftly and 2009 could be the year
we can not necessarily mean returning to soothing 'up for action.
look trends' and comforting returns because, if we 'Necessity is the mother of all inventions' -
really think about it, 'normal' has always been a 2009 could be the year when equity release
cycle of up and down, good and bad. begins to be considered as part of a more holis-
In a wider economic sense, most forecasters tic approach to retirement planning.
are being particularly cautious; indeed pre- Recognition of the fact that equity release is a
dicting just what might be coming next is means to access one of the customer's largest
very difficult. Some in the market may feel assets and an important option for many who
it is best to say nothing at this point with wish to maintain control and independence in
those that are willing to put their head their retirement.
above the parapet suggesting that the Of course equity release is not just about t
first half of 2009 is going to be very he customer, we must also consider the
tough. For instance, the providers' involvement in the sector. We
Confederation of British Industry may see some changes amongst the provider
has downgraded its forecast for the community as well during the year; we already
UK economy predicting it will wait to see what the future of Just Retirement
shrink by 1.7% this year. The might be. With interest rates on the way down,
Bank of England has predicted the cost of capital may also come down over
inflation will continue to decline time which could usher in the conditions that
to 1% by next year, which is just make the market look attractive from a
half of its 2% target; it has partic- provider's point of view. New providers and
ular concerns about the solvency new product offerings may then appear.
of our banks and the strains in the However, it could be 2010 before we see any
global money markets which have such changes.
reached unprecedented levels. In my opinion, 2009 will be a year when
Understandably, this will cause both businesses and consumers are holding
continued caution for some time to tight, battening down the hatches and waiting
come as the effects of the credit for the storm to pass. There are so many
crunch bite – however, this may well uncertainties at present that many are left with
mean the incidence of equity release little option but to wait and see. We are all
products being used could grow. Taking a praying that the UK recession doesn't move
common sense view would seem to suggest into a full-scale depression - history tells us
that overall demand for equity release will that during the US depression in the 1930s, the
increase for necessity purposes as individuals UK only experienced a recession. At that time
seeking to supplement dwindling incomes though, the cost of armaments and going to
and clear debts as the cost of living rises war in 1939 pulled us out of it - what is going
while incomes are reducing in real terms. to have that affect now I wonder?
The employment situation may also mean
that, those who are retired but were Focus on the achievable
thinking about part-time work to supple- The equity release market and those who work
ment their incomes, may struggle to find within it must focus on what is achievable and
such work as well. the wider goals for the sector. This means
The continuing tight property market essentially keeping up the good work, main-
also means that it will continue to be diffi- taining a strong market profile, supporting the
cult for those consumers who wish to sell education of advisers and helping consumers
up or trade down. As more people find find good quality advice when they need it.
themselves in financial difficulty or strug- Equity release will not be right for everyone,
gling with the mortgage, we could well see but now like never before, it is even more
parents and/or grandparents looking to important that the consumer has access to
release funds from their homes in order good quality information and they are made
to gift money to help their younger rela- aware of all their options. Only in this way can
tions out - an increase in the so-called they choose the most appropriate solution for
'living will' situation. Again, this could them.
mean an increase in equity release activity. At this time of any year, we may all wish we
had a crystal ball to see how events will unfold.
Nothing is certain Without that crystal ball, we must make sure
Having said this, nothing is certain, and noth- we are as prepared as possible for the unexpect-
ing seems to go as we expect at the moment, ed - firms that keep focused, look after their
therefore there is always the chance that the clients and prepare for the future will be the
sector may see a period of reduced activity. ones best positioned to ride out the storm and
This could be because people opt to take a 'wait come through the other side.
© Rrocio
www.mortgageintroducer.com February 2009 Mortgage Introducer
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