Equity Release:a rapidly growing market

offering new opportunities for

customers and advisersJuly 2016

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Introductions• Will Hale• Business Development Director• Key Retirement

• The UK’s No.1 independent equity release specialist

• Over 18 years experience in the specialist sector of retirement financial services

• 35% market share of UK equity release distribution

• Won over 50 industry and consumer awards over the past 10 years

• Over 80 employed advisers providing nationwide face-to-face advice• A referral proposition for intermediaries

• Ensuring customer access to the best advice on equity release products

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Equity ReleaseA rapidly growing market offering new opportunities for customers and advisers

• The potential• Growth of the market and new growth drivers

• The basics• What is equity release

• The opportunities• Popular uses for equity release and identifying

potential clients• Reasons to refer• Benefits of referring to the right partner

• Summary

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The potential

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The PotentialA rapidly growing market

Sources: Key Retirement Market Monitor Report, H1 2016

Market on track to exceed £2 billion for the first time

Equity Release Market rose by 24% to £934 million in the first half of 2016

Total property wealth increased by £181 million

Total number of plans grew by 11%

Average customer boosted income by £76,300

Current market - £1.4bnOrganic growth - £5bn by 2020 £17bn Cumulative IO Mortgages - £3bn annually 2017-2032Pension reforms,HNW clients,holistic plansHybrid products &innovation

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The potentialPension reforms and innovation – new funders required

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The potentialTicking time bomb of interest-only mortgages

64,000 people will have an interest-

only mortgage maturing

Every year a minimum ofwill have an average shortfall

of £56,200£1.7 billion

in potential lending each year

49% of these

to clear their debt, however that leaves74%who want to stay in their current property

26% will sell or downsize

Sources: Experian Analysis & Gfk Consumer Research, May 2013

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UndecidedHome improvements

HolidaysRe-invest in ISA'sLiving expenses

1818

2323

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The potentialPensioners with unprecedented control of their pension pots• 55+ savers plans for their retirement funds:

46% 31% 23%Take several smaller lump

sums

Take it as one lump sum

A regular income of

similar amounts• Spending intentions (top 5):

• Should property wealth also be considered when evaluating retirement finances?

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The potentialAging population with substantial property wealth

Over 11.4 million homeowners aged 55 or over

18% of all aggregated household property wealth worth £820 billion

65% have lived in their current property for at least 20 years

House prices are now x45 their 1970s level

Expected to grow by 5.5m between 2010 & 2030

Reaching a predicted £1.2 trillion in 2020

Almost half have no plans to downsize

Number forecast to rise every year from 2016 to 2020

Source: L&G Last Time Buyers Report, June 2015

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The basics

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The basicsLifetime mortgages and home reversion

CURRENT EQUITY RELEASE MARKET

Lifetime Mortgages(interest roll-up schemes)

Home Reversion(sell a % of your

home)

Lump Sum Drawdown Up to 100%

Max Cash / Enhanced Interest Payment

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The basicsLifetime mortgages

Lifetime mortgages

1. Max Cash/Lump Sum(standard and enhanced)

2. Drawdown(standard and enhanced) 3. Interest PaymentType

Typicaluses

Repaying existing debt and special one-off purchases

Smaller one-off purchases and expenses

Refinancing existing interest-only mortgages where

customer can service interest payments

LTV range 13% - 55.5% (enhanced) 13% - 55.5% (enhanced)

Interest rates

2.96% variable monthly (capped at 7.72%)4.88% - 7.30% fixed (enhanced)

5.04% - 7.30% (enhanced)

Source: more 2 life market data

Providers

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The basicsRecent product innovations

Higher LTVs for clients with medical conditions/lifestyle issues that could affect life

expectancy

Enhanced Plans Similar to those often found in the residential market, as

opposed to gilt-based ERCs (Mark to Market)

Fixed ERCs

Options for programmed repayment of interest and also voluntary ‘flexi-repayment’

options

Interest Payment

Sources: Experian Analysis & Gfk Consumer Research, May 2013

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FUTURE RETIREMENT LENDING MARKET

The basicsMeeting client needs – filling the gaps

Index Linked Hybrid Products

RPI/CPI Income producing

Traditional Lifetime Mortgages

Lump Sum Drawdown

Max cash/enhanced Interest Served

Interest Served and roll-up completed

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The basics

It’s too expensive!• The current lowest equity release interest rate is 2.96% (variable monthly)

The interest build up will leave me with no equity• It may do - but house prices could increase over the same period too leaving more equity

I won’t own my own home any more• With a lifetime mortgage the client retains 100% ownership of the property

I’ll be forced to sell my house• The property will only be sold once clients have died or moved into long term care

I’ll leave my family with my debts• Beneficiaries are never left in any debt with the plans Key recommend

Challenging common misconceptions

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The basicsHPI versus interest roll-up

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The opportunities

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The opportunitiesPopular uses for equity release

65%•Home and/ or garden improvements

29%•Pay debts (e.g. loans, credit cards)

29%•Go on holiday

24%•Treat or help family or friends

22%•Clear outstanding mortgage

13%•Help with regular bills

Sources: Key Retirement Market Monitor Report, H1 2016

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The opportunitiesPopular uses for equity release

• Home and/ or garden improvements• Consistently the number one use for some/ all of funds

raised• Interest-only mortgage maturities• 2016 is seeing the start of the first major wave which

the FCA and lenders alike are most concerned about• Mortgage repayment has grown as a usage for equity

release more than any other• The ‘Bank of Mum and Dad’• Set to be involved in 25% of all mortgage transactions

this year• Collective lending from this source is equivalent to a

top ten mortgage lender• Record pensioner property wealth• Grown by £9.24 billion this year along, to £926 billion

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The opportunitiesLending into later life is a newsworthy ‘hot topic’

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The potentialEmerging trends

If you have clients who have a property worth less than

the house they want to move to

Wanting to move home Equity release could allow your client to ‘buy out’ their

partner

Going through a divorce

An option for clients interest in buying a second property, holiday home or motorhome

Buying a second home

Sources: Experian Analysis & Gfk Consumer Research, May 2013

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Reasons to refer

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Reasons to referUse your time wisely and reduce your exposure to risk Key Partnerships guarantee

to be up to date with all new products, providers and innovationsto search the whole of the market to find the best plan for

your client

to keep you regularly updated throughout the process

access to special offers and preferential terms

to take full compliance responsibility for the advice we provide

Generous commission paid on completion – average of £1,452 in 2015

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Reasons to referThe referral process

Refer

• your client to Key Partnerships via phone, email, web or paper

Relax

• while Key find the best deal for your client and take them through the process, keeping you constantly updated

Receive

• your commission : the average commission paid for each completed case is £1,452!

• Is simple

In 2015, 79% of Key Partners earned an average of £1,452 in commission.

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Summary

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Equity releaseA rapidly growing market offering new opportunities for customers and advisers

The equity release market

is growingMore

competition and choice

Widening appeal

Specialist knowledge is paramountMore plans

and innovative products

Constantly changing market

Work with the

UK’s No.1Be able to

offer equity release

Refer your clients to the best

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Thank you0845 121 2128refer@keypartnerships.co.uk

www.keypartnerships.co.uk

www.twitter.com/keypartnerships

For intermediary use only

Key Partnerships