At a recent conference, Angela Robertson, a prominent figure in the retirement lending industry, shared her insights into the current state and future prospects of later life lending. According to Robertson, the sector faces challenges due to the current economic climate and fluctuating interest rates. The reduction in customer numbers has been unexpected and difficult for many advice firms, but there’s a sense of optimism for the future.
The Return of Demand and the Importance of Good Advice
Robertson believes that demand for later life lending will bounce back as economic conditions stabilize. She emphasised the importance of being prepared to respond to this resurgence with more comprehensive and holistic advice. The focus, she insists, should be on maintaining high standards and ensuring the best possible outcomes for customers. This involves providing personalised solutions and quality advice, products, and services.
The Role of House Prices, Interest Rates, and Inflation
Hansen Lu, a senior economist at Aviva, highlighted the key factors impacting the equity release market: house prices, interest rates, and inflation. He noted that house prices have fallen by around four percent recently, with expectations of a further decline. However, fairly valued house prices are beneficial for both the industry and the broader market, reducing lender risk and making homes more accessible.
The Current Economic Landscape
Lu described the current period of high inflation and increasing interest rates as abnormal, with a gradual decline expected. He projected the interest rate to stabilize at around 4.75 percent by the end of the next year, with long-term rates expected to settle lower than historical levels but higher than the lows of recent decades.
Market Expectations and Long-term Trends
Long-term gilt rates, crucial in the equity release market, have been volatile, influenced by expectations of future interest rates. Lu believes that while the market may not return to the ultra-low rates of 2019-2020, a normalization of economic conditions is likely on the horizon.
Conclusion: A Bright Future with a Focus on Quality Advice
In summary, the later life lending market is poised for a rebound, contingent on the stabilisation of economic conditions. Industry leaders emphasise the need for robust business models, personalised customer solutions, and quality advice to navigate the changing landscape. With these measures in place, the future of later life lending looks bright, offering promising opportunities for both customers and lenders.