Thomas Bodereau, Arrago: We foresee a potential equivalent lifetime mortgage market in France to that of the UK
Thomas Bodereau, Co-Founder and CFO of French lifetime mortgage provider Arrago, describes the company’s journey to date and shares his perspective on prospects for growth in the French market, in view of the ageing demographics and high home ownership rate.
What was the rationale behind the creation of Arrago back in 2017? What potential did you see for the lifetime mortgage market to develop and what has been your experience since then?
Arrago has already had ‘two lives’. In 2017 we were a private debt broker specialized in sourcing performing private debt from 2nd and 3rd tier French banks’ balance sheets. Those private debts were sold through a call-for-tender process to various asset managers, insurance companies or banks across Europe. We had sold around EUR 600 million of those private debt, especially long duration ones.
We held a specific discussion with British investors about lifetime mortgages as a very interesting asset class. It appeared that we knew very well the French lifetime mortgage because Arrago’s team is composed of three former Crédit Foncier de France (“CFF”) officers, and CFF had been the only bank which was very active in the realm of such mortgages in France.
Thus, in late 2019, we kickstarted Arrago’s ‘second life’ by deciding to move forward and develop such an offer in France. We were convinced of the benefits for the French people as they were only served through home reversion (known as “viager”) which is not a mass market product.
In 2022, our endeavours led us to raise EUR 5m in equity and EUR 50m of debt to start providing lifetime mortgages. We launched our offer in March 2023 with a French retail bank.
What potential did you see for the lifetime mortgage market to develop and what has been your experience since then?
Demographics in France are similar to those of the UK, with a similar rate of ownership by elderly people. We foresee a potential equivalent lifetime mortgage market in France to that of the UK. Home reversion represents only 5,500 transactions but in my view lifetime mortgages are a much broader product and could be ten times bigger. However, people in France are not currently much aware of lifetime mortgages because the offer has been very limited so far. The aim is to build wider awareness and familiarity with the product.
2023 was our first year, where we were active for just 10 months. We have assembled a full team of 11 employees to achieve a complete operational base and are already the leader in the market with EUR 10m originated. We already have much bigger figures in our business pipeline for 2024.
How would you describe the current market for equity release in France?
The market for equity release in France is currently very tiny since there was hardly any offer, but we know that several banks and fintechs are looking at this area closely. For banks the market is small and in its nascent stage as compared to their more established forms of lending (consumer loans and real estate loans).
What sales channels are available in France?
In France equity release products can be sold by retail banks, brokers, and promoted by business introducers such as home reversion providers, realtors, companies offering products or services tailored to the over-60s, and insurance companies having elderly people as clients.
How are lifetime mortgages used in France to supplement the income of elderly homeowners? What are the primary uses of the product?
While on average France pensions are rather high as compared to some other European countries, they are under pressure and have been impacted by recent inflation. Our customers mainly use the proceeds to refurbish their homes, offset pensions which may be declining in value in view of high inflation, make gifts to their family and early repayments on existing amortizing loans.
What opportunities do you see for new funders and investors to enter the French market?
France is potentially the biggest market in continental Europe for two reasons:
- Very supportive demographics
- Home ownership rate above 70%
Regarding funders, established players from the British market and French insurance companies have a fantastic opportunity to enter a market in its early stage and under rather promising conditions.