After a protracted period of inactivity, the Equity Release market appears to have suddenly sprung into life, with a throng of new entrants and High Street banks supposedly ready to throw their hats into the ring, and signs of a renewed focus on innovation amongst existing providers.
There are of course a number of forces acting to bring about this resurgence, not least of which is the increasing number of existing mortgage customers who are on interest only deals and are approaching retirement. Whether through poor planning or under-performing repayment vehicles, many of these borrowers are facing the prospect of being unable to settle their mortgages at the end of the term. This can only be exacerbated when interest rates eventually rise and repayment customers also find themselves struggling to keep up their instalments.
Equity Release can provide a possible exit for these borrowers – by transitioning at the end of the loan term to a lifetime mortgage the customer is able to remain in their home and the lender has a realistic prospect of recovery, albeit over a longer time frame.
If as predicted these pressures lead to a ramp up in equity release volumes, providers who lack the systems and processes to operate efficiently will risk being inundated through an inability to cope with the workload, or being priced out of the market as their handling costs are so much higher than those of the lenders who take full advantage of technology.
By taking on board the innovations in process efficiency and automation that have revolutionised the residential mortgage market, Equity Release lenders can boost efficiency, minimise costs and provide the intermediary with modern online application processing and case tracking tools into the bargain.
High street banks may seem to be best placed to be first to market with this new approach as they have the resources and the technology building blocks in place. However, their size and momentum sometimes makes them less agile than the smaller players who can act quickly to leverage a new opportunity.