30th November 2020
As the rising tide of Coronavirus cases continues to impact on social and economic conditions around the world, a climate of disorientation and of pronounced uncertainty has taken root at the heart of public life. Most events of global significance can be measured in terms of a specific root cause or as a combination of factors, invariably political or economic in nature. Yet, the onslaught of the Coronavirus continues to defy conventional categorisation, representing an event which can only be defined in terms of its unpredictability, singularity and potential for future damage- a Black Swan event, as many commentators have chosen to describe it. Previous pandemics have demonstrated an almost limitless capacity for economic and social upheaval, with recessions or downturns proving a near-certainty in most cases. However, careful analysis of these events can also help policy makers to identify the type of measures which are needed to minimise long-term economic damage and to protect the health of populations- a sort of warning from history as it were. For example, the last pandemic of truly global proportions, and the event which comes closest to mirroring our own circumstances, was the Spanish flu pandemic of 1918-19; an outbreak which accounted for at least 20 million fatalities over an 18 month period as well as a catastrophic decline in manufacturing levels, consumer spending and business activity in general. This led to significant financial reverses around the world, with the UK experiencing a 6% decrease in GDP and the US suffering comparable difficulties.
However, recent research has established that US cities which sought to contain the influenza virus by implementing stringent social distancing measures at an early stage experienced far lower mortality rates than those which ignored the rise in cases, while also demonstrating far stronger economic performances once the pandemic subsided. Moreover, analysis of post-1919 economic conditions has suggested that any future downturn is likely to be short-lived (representing a sharp V as opposed to an extended U), with economists pointing to the probability of a brief, though undoubtedly severe, recession in the short-term and the possibility of positive growth emerging in the last quarter of the year (depending on containment and quarantine policies, financial stimulus from the government as well as low, or even negative interest rates to support spending measures). So, the outlook may not be as bleak as some would have you believe.
Nevertheless, as the value of pensions, savings and other investments continue to fall prey to the vicissitudes of the stock market and mainstream finance options begin to falter, the need for UK retirees to establish dependable sources of income or to offer financial support for family members has become a matter of grave urgency. Many financial experts believe that the equity release sector is uniquely placed to help older customers meet their financial obligations, offering a level of flexibility and choice that could prove crucial to those who are reliant on equity wealth to stay afloat. Moreover, with many mainstream mortgage lenders choosing to suspend applications or to impose caps on borrowing, experts predict that demand for ER products will continue to grow exponentially over the next few months, with some lenders (such as More2life) already prioritising the use of video conferences and laptop valuations to keep customers on top of transactions. Indeed, anecdotal evidence has already suggested a dramatic upsurge in the number of financial advisers taking their ER qualifications (primarily, it would seem, to remain competitive), while research by the comparison website, Over50schoices. Co.uk, has discovered that consumer interest in ER products has remained buoyant, albeit tempered (as you would expect) by a degree of hesitation. So, consumer confidence, a fragile commodity even at the best of times, would appear to be undaunted by current events.
All of which is marvellous to hear. However, for many within the sector, equity release has always been about more than just profit or financial gain and the industry has taken a great deal of pride in the standards and safeguards that have been introduced over the years to protect customers. Indeed, it is the ability to transform people’s lives for the better, while ensuring that all applications are underpinned by a robust and impartial legal process, that remain at the heart of everything that we do.
To this end therefore, the industry has been working hard to ensure that standards of service and protection are maintained throughout the crisis and that existing safeguards are strengthened to counter the growing risk of wrong-doing or individual harm. For example, as the number of people losing their jobs continues to rise across the UK, the potential for fraud, duress or outright coercion of vulnerable customers is likely to intensify accordingly and the Equity Release Council has sought to pre-empt such occurrences by consulting with members on possible changes to their standards. These are designed to allow for a temporary modification of rules governing the necessity for face-to-face legal advice and to ensure that customers are offered the same level of protection and advice via remote consultations.
However, a potential stumbling block to the proposals is the requirement under English law for deeds to be physically witnessed by a legal professional and we are currently waiting to see if lenders will accept the possibility of a scenario involving non-legally qualified witnesses. If for any reason they choose not to, we could see a distinct lack of lending in the near future and the possibility of the sector grinding to a halt; something that nobody wants to happen. Because, there can be little doubt that, given the chance, equity release could play a major role in mitigating the economic effects of the Covid-crisis and provide a lifeline for many thousands of vulnerable people. A genuine force for good.
