Claire is the managing partner of Equilaw Ltd and Chair of the Equity Release Solicitors Alliance. She took a traditional path into law, working in a residential property team in a mid-size corporate firm. This is where, 13 years ago, she started working with one of her current business partners. She set up the equity release arm of their business in 2001. In 2007 this was rebranded to Equilaw and in 2008 it became a Limited Liability Partnership.
The two of them then decided to break off on their own. They met their third business partner and bought out the residential property arm of their old business and the entirety of Equilaw in May 2010.
Between the three of them they now own Thomas Law Group and Equilaw. Claire set up the Equity Release Solicitors Alliance back in 2008, in order to help consumers, IFAs and product providers who were looking for law firms who were specialists in Equity Release. The Alliance was launched formally at the Law Society in January 2009.
How would you explain equity release?
It’s a mechanism that allows people to utilise the wealth that they have tied up in their homes. They might be cash poor but asset rich. They could have paid off their mortgage, or have a very small mortgage remaining. Essentially their wealth is tied up in bricks and mortar.
What they can do is get a loan against the house, which is usually secured as a lifetime mortgage (I won’t go into home reversion plans, as these only account for 2% of the market currently). A lifetime mortgage means the client can take money out as a lump sum. They might choose to retain a draw down facility as well, on which they don’t pay interest. No repayments are required during the life of the loan and the client can basically stay in their home for as long as they want to or need to.
All of the lenders belonging to the Equity Release Council have agreed that if the loan exceeds the value of the house when the last person is no longer living there, then they won’t seek to recover any shortfall. So it’s a no negative equity guarantee.
It’s a win win situation for the client. They don’t make repayments (or pay ground rent on a home reversion scheme), they get a chunk of cash that they can use as they want and they can stay in their house. Innovation is coming into the sector and some providers have introduced products where homeowners can pay the interest if they want to.
Do you think now is the “golden age of equity release”?
For a long time in the industry we’ve always seen this as a great product for the right person. But there wasn’t a massive amount of awareness of it. That’s changing. The demographic is changing as well. We’re getting to the stage now where baby-boomers are retiring. They tend to be more familiar with credit and are comfortable with having a mortgage. Usually their children are more self-sufficient and are taking the view that they aren’t expecting to inherit. They want their parents to have a really great time in retirement. So we’re now also getting enquiries from the children asking -would this be a good idea for my parents?
When equity release is right, it tends to provide a brilliant solution. My view, and that of the industry, tends to be that times are looking very positive for equity release. If you look at the Equity Release Council results, and those of the providers, an increased number of plans have been sold over the last two to three quarters. We’re now getting back to where we were before the downturn.
How receptive do you find solicitors are to equity release?
It’s funny, because when the initial recession hit there was quite a lot of interest. People realised conveyancing and remortgaging were both taking a bit of a nose dive and were looking to redeploy staff. A lot of lawyers dipped their toes in the water and then quickly realised it’s really quite a technical area and they need to be tooled up to do it. I think there’s still an issue with solicitors not being aware of the types of products that are out there and still having the misconception that they are dangerous.
But equally, it’s not the type of area of work that you can just treat as a simple re-mortgage. The Equity Release Council is on the verge of publishing new rules and guidance as to how everybody in the area should be carrying out work. Basically, this will be new best practice guidelines for solicitors, providers, advisers and surveyors.
How do you feel about the elderly care cap?
I think the government care cap is an interesting one and I’m pleased to see they’ve put a cap on the care side of it. The cap is £75,000, but it is well above what was recommended in the Dilnot Report. What it doesn’t include are the “hotel” costs of care; the food and lodging side of things. I would say it’s still going to be quite difficult for people to cover everything they need. I’m sure equally providers will start to offer some quite innovative products.
So do you see the shape of your business changing?
We are excited about the future. We have been in this business for a long time and it’s really positive to see the market growing again. Like everybody else, we had to make redundancies in 2008 so it’s great to be recruiting again, as well as expanding into new premises.
Do you see any big changes on the horizon?
I think the Equity Release Council is going to continue to grow. Membership has already bypassed 250. Standards should be enhanced. We’ve waiting to see whether new providers will enter the market, or whether mainstream lenders will either enter or re-enter the market. Technology will play a huge part of the future. We’re in the age where clients are moving to email; I can see a point where we start having Skype appointments etc. The future looks bright for those who are serious about this market!