It seems hard to believe that we are almost at the half-way point of 2023, and that soon we’ll be pushing into H2.
Being almost six months into the year – and let’s be fair, it’s been eventful to say the least – does hopefully give us a chance to reflect on what has gone and the themes we have seen/are seeing and are likely to witness over the course of the next six/seven months.
At a recent ‘Breakfast with Stuart’ meeting I was asked to give my thoughts on all of the above, particularly within the context of a wider mortgage market which is undoubtedly trying to get to grips with stubbornly high inflation and what this means for rates, funding, overall pricing and availability of product.
Despite a pretty tumultuous period, I am pretty confident that we’ll see later life lending business activity continue to develop and grow over the course of the next half-year.
Indeed, at the start of 2023, I went on the record and predicted more cases would complete in the second half of the year than the first, and I’m not seeing anything to change my mind on that.
For a start, we have all had a lot to contend with over the course of the first part of the year, not least the work that has needed to be done in terms of getting ready for the Consumer Duty rules when they are applied at the tail-end of July.
I don’t think we as a financial services sector can downplay the sheer investment, resource and cost that has come with Consumer Duty compliance, and of course, this is not the end of the process at all; in fact it’s just the start.
Consumer Duty is going to be a constant in all our working lives going forward, and we can expect to be challenged by the regulator on what we have done, what we are doing, and how we are making the overall consumer experience and journey better as a result of the changes we have made.
As mentioned, that will continue to be a major focus for all firms, and it is perhaps not surprising that until we start to see feedback and precedent, in terms of how the FCA interact with advisory firms, how they review compliance, etc, that there will probably be a sense of nervousness about whether what has been done is actually what the regulator anticipated.
The devil will be in the detail, or the proof will be in the pudding – however you want to call it – but this is a real acid test for the regulator given the scale of the project, and so we should all anticipate further missives, activity and intervention as it delves into how the industry has responded.
Despite this major regulatory project, I feel that our part of the market is starting to resemble one which is growing in confidence. Talking to advisers, leads and referrals appear to be picking up, and firms are responding to the changing nature of what a ‘later life lending customer’ is and what they are looking for.
It’s been mentioned before but we have moved away from a sector predominantly servicing aspirational clients, wanting to use the released equity for cars or holidays, etc, to one which is very much needs-based.
Where once we might have dealt with a client who has three or four plans/uses for the money, now we are seeing this being more likely to be one or two, and that is having an impact on the loan levels in particular.
Confidence also manifests itself in terms of active providers, and it has been very positive to see LiveMore recently launching into our space, plus the return of Apex, at the moment with a high LTV offering.
More lenders and providers creates greater product choice, broadens competition in the sector, and gives advisers more options to offer their clients – so long may we see new players making their mark.
One other point to be aware of here – particularly in an environment where LTVs have fallen – is that advisers still have access to enhanced LTVs from certain providers if they have a client with health issues, for example. This is not about clients necessarily nearing the end of their life but can be those who have a lower life expectancy in general, it could be higher heart pressure or they’re a smoker, or simple the postcode in which they live, which can often have an impact.
I would urge advisers to work with lenders and to spell out those potential health issues for certain clients, because it could make all the difference in terms of the level of lending they can achieve/LTV they can access.
Overall, I am very positive about what the rest of the year will bring. Our own figures suggest something of an upturn in activity, and the advisers I’ve spoken to recently are suggesting this is the case right across the piece. We have a well-catered for market, with an appetite to lend, and a demand that is only likely to rise. As we move into the rest of 2023, I’m confident that the best months of the year are ahead of us.
Stuart Wilson is chairman of Air Club
