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Paul Turner, Managing Director Retail at Just Group, highlights that the UK equity release market is climbing back to normal levels, despite the pandemic, and identifies funding opportunities for UK life insurers in Europe.

How would you describe the current market for equity release in the UK?

After a record start to the year, lockdown was a big reversal. The latest figures for the UK market from the Equity Release Council show the market is climbing back towards normal levels – with the number of new plans purchased in Q3 only 9% down on the same period last year, the value of those plans down just 3% and the number of customers in Q3 increasing by about 40% compared to Q2. 

To what extent has Just Group been able to take its business online, in the light of the COVID-19 pandemic? What are some of the challenges faced during periods of lockdown?

Our business moved to remote working quickly and efficiently but parts of the equity release process, such as the requirement for face-to-face legal advice or on-site property valuations, clearly presented some challenges when operating remotely. Given customers are older they were naturally more concerned about being exposed to coronavirus.  

We’ve quickly adapted how we do business to maintain high levels of protection for our customers – either by making sure they could still access quality, independent, legal advice without having to leave their home, or arranging desktop valuations where the customer was uncomfortable with someone visiting their home. 

The property market was effectively closed for a period – putting lifetime mortgages customers, or their beneficiaries, trying to sell properties in a particularly difficult position.  Just was the only lifetime mortgage firm in the UK to give hundreds of pounds back to these customers, by reducing the interest rates while lockdown kept the market closed.

Just Group undertook research earlier this year to find out how people’s perceptions of their house had changed after they had been working from home. What were some of the key findings? Can any lessons be drawn regarding likely future demand for equity release products?

One of the ideas lockdown raised was whether people would want to move house after being forced to spend so much time in their homes. Not so, according to our research. Most people were happy with their homes with only 13% saying it felt like a prison in lockdown. A greater proportion were happy to stay put and some wanted to modify their homes to suit their changing needs.  

This mirrors the equity release market.  People often have an emotional connection with their home or neighbourhood – they’d rather not move but do want to make use of the value in their house. One of the most frequent uses of lifetime mortgages is to make home improvements so customers can stay in their homes comfortably as they get older.  

Just Group recently launched the UK’s first green lifetime mortgage. What can you tell us about this initiative?

Another first by Just for the UK equity release sector – one we’re really proud of. The green lifetime mortgage from Just offers discounted interest rates to new customers whose property has an A or B rated Energy Performance Certificate. And it supports the UK Government’s Green Homes Grant scheme which offers financial support to homeowners to make their homes more environmentally friendly.  

With regard to funding, there is a surplus of funding available in the UK equity release market, while a number of equity release markets in continental Europe are under-funded. What opportunities do you see for new investors and funders in the European equity release market overall?

A recent report from EY in the UK estimated that there was £6bn p.a of available funding for equity release, however the market size was just under £4bn p.a. Most of this funding supply comes from life insurers active in the Defined Benefit De-risking market – equity release mortgages are a very good ALM match for the insurers’ long-dated illiquid liabilities – which is the fastest growing life insurance market in Europe, the funding supply from this sector is expected to grow even further in future years. Therefore, I expect UK life insurers to increasingly look towards European equity release markets for funding opportunities. The funders will require scale, robust customer standards and harmonised standards and products features across the EU markets.