Equity Release - UK : Market Research Report

Equity Release - UK

Published by: Mintel International Group Ltd.

Published: May. 1, 2008 - 117 Pages

ISSUES IN THE MARKET: Key issues; Market background and definitions; Abbreviations
MARKET IN BRIEF: Average value of loans in decline as the number of new sales rises; 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
INTERNAL MARKET ENVIRONMENT: Key Points Summary; Steps being taken to ensure confidence; The important role of SHIP; 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?; Concern over homeowners using equity release too early; Equity release and IHT
BROADER MARKET ENVIRONMENT: Key Points Summary; Rapidly ageing population expands target market; Men leading long-term growth among over-65s; Time spent in retirement will continue to increase; Longer retirements but less money to fund it; More people working past retirement age; Pension provision may not be there, but property wealth likely is; 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; An Irish example?; The base rate and the market for equity release schemes; Impact of the credit crunch; Retirees will be more comfortable with debt; Government attempts at damage control still not enough for many
COMPETITIVE CONTEXT: Key Points Summary; Equity release alternatives; Downsizing; Assistance from family and friends; Savings and investment products; Pension provision; Property investing; Other types of equity release
STRENGTHS AND WEAKNESSES IN THE MARKET: Market strengths; Market weaknesses
TRADE PERSPECTIVE: 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: FORECAST; Factors used in the forecast
MARKET SEGMENTATION: Key Points Summary; Lifetime mortgages responsible for 93% of new equity release sales; New sales of lifetime mortgages reach £1.1 billion in 2007; Demand for flexible drawdown schemes driving down average loan value; Home reversion sales have risen since 2005; Prospects looking good
MARKET SHARE: Key Points Summary; Competition is heating up as smaller players experience strong growth; Fallout from Northern Rock still unclear
COMPANIES AND PRODUCTS: SHIP MEMBER COMPANY PROFILES
BRAND COMMUNICATION AND PROMOTION: Key Points Summary; Over 20% of mortgage industry adspend was on equity release in 2007; Norwich Union continues to spend the most on advertising; Direct mail still most common form of advertising media used; But is direct mail really effective?
CHANNELS TO MARKET: Key Points Summary; Close to 80% of sales generated through intermediaries in 2007; Volume sales via intermediaries also leap ahead; More providers have invested in direct distribution; 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: Key Points Summary; One in four own their home outright; With age comes equity build-up; Many of the less affluent may be rich in equity; Regional variations in home ownership; Media usage and home ownership
THE CONSUMER: ADVICE, AND SPENDING PATTERNS: Key Points Summary; Providing an income in retirement the top reason for releasing equity; Helping the family out; 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; Homeowners closer to retirement more likely to seek advice; ABC1s most likely to seek specialist advice; Regional variations in going about arranging equity release; Media usage and arranging equity release
APPENDIX - ADVICE, AND SPENDING PATTERNS BY DEMOGRAPHICS: Figure 39: Most popular reasons for releasing equity, by gender, age, marital status and lifestage, February 2008; Figure 40: Less popular reasons for releasing equity, by gender, age, marital status and lifestage, February 2008; Figure 41: 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 42: 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; Figure 43: Most popular reasons for releasing equity, by TV region and supermarket usage, February 2008; Figure 44: Less popular reasons for releasing equity, by TV region and supermarket usage, February 2008; Figure 45: Most popular reasons for releasing equity, by daily newsapaper readership, technology usage and Internet usage, February 2008; Figure 46: Less popular reasons for releasing equity, by daily newsapaper readership, technology usage and Internet usage, February 2008
APPENDIX: RESEARCH METHODOLOGY

Abstract

It has been predicted for some time now that the equity release market is set for strong growth, with a rapidly ageing but asset-rich population facing the realities of inadequate pension provision in retirement. Up until 2007, while there has been steady growth, a major boom in growth has yet to occur due to a number of factors such as negative media coverage, lack of regulation and limited access to advice, which have held the market back from reaching its full potential. Over the past year, however, with the industry achieving full FSA regulation and significantly raising standards for advice, it appears that a foundation has finally been set for the market to achieve the much-hoped-for growth.

In the short term, however, the equity release market still faces a number of issues before it can really take off. For example, full regulation and stricter standards for advice have increased the cost of compliance and are stoking fears of a shortage of qualified advisers, while unregulated copycat products have put a blemish on the market by being unfairly associated with equity release. Furthermore, consumer research has revealed that a large proportion of the population are still unlikely to ever consider equity release. On a positive note there is already evidence that industry stakeholders are already taking steps to address these and other issues.

This report examines the latest developments in the equity release industry, ranging from demographic and economic trends to the potential impact of increased regulation and competing alternatives. The Market Size section details changes and potential for growth in each segment of the equity release market, while the report also identifies the key players and their performance within the marketplace. Finally, consumer research highlights trends in home ownership and attitudes and behaviour towards the concept of equity release.

Key themes of the report:

The recent decline in housing prices is causing a decline in homeowner confidence regarding the future build-up of equity in their property.
The credit crunch is further delaying the entrance of big-name lenders into the market as their focus has shifted to supporting more traditional mortgage products.
Full regulation of equity release products is a welcome development but the time and cost of compliance are causing concern about the availability of qualified advisers.
Recent negative press associated with the previous generation of faulty equity release products as well as unregulated copycat sale-and-lease-back schemes have unfairly given modern equity release products a bad image.
Consumer research has indicated that more than half of homeowners would ever consider equity release while only one in six think the concept is a good idea.
The impact that equity release has on inheritance and in some circumstances entitlement to state benefits may make alternatives to equity release such as downsizing more attractive for some homeowners.

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Equity Release - UK

Table of Contents

Abstract