Lifetime market set to come of age

Tag : Men's Slippers
How quickly times change. While lenders batten down the hatches andlook inwards for business growth, brokers are left with fewerproducts to recommend. But the prevailing economic uncertaintydoesn't mean the broker sector must suffer its own crisis.
As the housing market slows down, the result is likely to bereduced new mortgage volumes. But fortunately the lifetime marketis insulated against such problems.
As consumers struggle to gain access to sources of personal financesuch as traditional mortgages, it could be argued that we'll see anincrease in lifetime product sales as a valid alternative.
And consumers are ready to eat into their financial legacies. Goneare the days when they felt they had to leave as much of aninheritance as possible.
The baby boomer generation has arrived and they want to enjoy theirretirements. And no wonder - the average life expectancy of a 65year old man is 86 years, while 34 percent of 65 year old men willlive beyond 90. That's a long time to settle down with the pipe andslippers.
Our income drawdown lifetime mortgage is proving increasinglypopular with customers who have aspirations for their retirements,whether it's buying the car they have always wanted or going on around-the-world cruise.
This is no longer the product of last resort. It is becoming anintegral part of retirement planning.
Of course, the product still has its part to play in paying offpensioners' debts and providing essential retirement income.
In many cases, lifetime mortgages are a lifeline for those who havenot prepared adequately for retirement.
With the UK's savings ratio at a 47-year low it's perhapsunsurprising that around 25 percent to 30 percent of the marketseeks lump sum lifetime mortgage products - indicative of payingoff debt or dealing with essential outlays that have not beenplanned for.
These varying needs have meant that the market has had to evolve.There are more providers with increasingly innovative products tochoose from. Flexibility and choice are key and with extraassurances from governing body Safe Home Income Plans, equityrelease is shaking off its unglamorous reputation.
As a result of these changes, we believe the lifetime mortgagemarket is set to boom. While it has been growing steadily in recentyears, we could be on the cusp of great things.
The fact that we've been inundated with applications for ourlifetime mortgage qualification is no coincidence. It's not amatter of if but when, and the opportunity for brokers to playtheir part in that growth is key.
One of the reasons the lifetime mortgage market has not grown asquickly as expected is the lack of qualified and experiencedprofessionals advising on it.
Demand exists but the industry is not equipped to meet it. And yetthe opportunity and potential rewards for brokers are clear to see.Borrowers who have interest-only mortgages are increasingly turningto lifetime products to repay their loans when they retire and thecredit crunch may accelerate that need.
The crunch is also being blamed for lenders demanding higherdeposits from an already troubled first-time buyer market. Advisingfamilies on releasing funds from, say, a grandparent's home toprovide deposits for the next generation is on the rise.
From a consumer point of view, one of the main features of lifetimemortgages provided by SHIP members is that their interest rate mustbe fixed for the life of the loan.
So lifetime mortgages will not be affected by the risks associatedwith being forced to refinance at higher rates of interest, as isbeing seen in the traditional mortgage market at the moment. Also,they are advised sales that offer good rewards.
The key barriers for brokers recommending lifetime mortgages toclients are the extra qualifications required and the extendedsales process involved.
Some brokers are put off by this but what many don't realise isthat the main equity release providers have teams of staffdedicated to guiding new entrants to the market through theprocess.
We have a team of consultants who will help brokers structurebusiness plans, marketing strategies and also hold their handthrough the sales process once they have qualified. In fact, theywill also help brokers gain qualifications and offer direct accessto an experienced technical team for any questions they may have.
The Financial Services Authority has also provided a helpful andprescriptive fact-find and SHIP provides a sizeable amount ofsupport too. The key is to use the guidance available.
With properties playing an increasingly important role in savingfor and as nest eggs in retirement, the role of brokers has neverbeen so important to the man on the street.
In many cases, brokers are the only advisers clients will speak to.Education of customers is crucial as many don't even realise theycan release equity from their homes and are ignorant of no negativeequity guarantees.
The key for brokers is not to be left behind and to seize theopportunities. With the credit crunch tightening its grip andtraditional mortgage business slowing down, there may never be abetter time.
Keith Haggart director of lifetime mortgages, Prudential>