Peter Welch of Bridgewater Equity Release

We had a chat with Peter Welch, Head of Sales and Distribution at Bridgewater Equity Release Limited, about what makes equity release useful and how he sees its future in the financial industry....

1) Firstly, what exactly does Bridgewater do?

Bridgewater is a home reversion provider. We help people over 65 who own their home and want to release cash from property. We buy all or a percentage of their property from them, in return they can live there for the rest of their life rent free. In order to achieve this we will buy all, or a percentage of the property at a discount to the market value.

Typically, we enable customers who are in standard health to release a lot more equity than a lifetime mortgage. All our products are Safe Home Income Plan (SHIP) approved. SHIP is the trade body that was set up in the early 1990s to "kite mark" products and alleviate any customer fears about equity release. We are also FSA regulated, and as a final layer of protection clients are also protected by property law.

2) How long have you worked for Bridgewater and what did you do before?

I have worked there for nearly four and a half years. I have 24 years of experience in intermediated sales, dealing with IFAs and mortgage brokers. The first company I worked for was Royal Sun Alliance.

3) What do you predict happening in the debt management sector over the next 12 months?

That’s an interesting question. I think we may see little movement over the next year, but if interest rates do go up it might ‘uncork the bottle’ and things will change very rapidly. The current consensus though is that we may not see interest rates rise for 12 months at least.

4) Why do you think that equity release is important or useful?

I think equity release is particularly useful for those in retirement who have their own home but who also have debts. We can work with clients to effectively swap their debts for equity by doing equity release, which dramatically increases their disposable income. With regard to those individuals who are in retirement with fixed incomes, if inflation rises they will be hit harder than those in work, so equity release provides a good alternative for them.

5) How straightforward is the procedure?

The procedure is actually very similar to remortgaging. All equity release business is advised beforehand.

Consumers meet financial advisors, typically twice, who if equity release is suitable recommend a particular product for them. There are no credit checks and no credit scoring with Home Reversions. The process is a property transaction – Bridgewater purchases the property after it has been surveyed by a RICs surveyor who recommends a price which we will then offer. The client then instructs the solicitor to proceed. Essentially it is a sale and purchase transaction, and should take 12 weeks from start (including the initial advice meetings) to finish. 

6) How do brokers benefit from telling their clients about your company?

I think advisors would benefit from telling their customers more about home reversion because it releases more cash for their customers than a lifetime mortgage does. The process passes the risk of house prices going down in value from the consumer to us, the provider. With a lifetime mortgage, the interest is compounded, so consumers could end up exhausting all of the equity in their home if they live a long time and house prices don't keep going up.

7)  Do you think more people are facing up to their financial problems?

I don’t think people are. Generally, people take the ostrich approach until something happens. It is not until we get a major shock that we take action.

8) Do you expect the financial situation to improve in the coming months?

That’s a very good question. I don’t think there will be any change, unless something happens from leftfield in the economy.

9) How will this affect the future levels of house price inflation?

Over the long term house prices rise for two reasons –inflation in the economy, and wage growth which means that consumers have more to spend on their mortgage. Imagine there was no inflation, and no wage growth. If house prices go up, we would get to the point where they are unaffordable.

I think that 4 per cent house price inflation sounds like a good number in the long run. We have calculated this based on a growth of 2 per cent with regard to earnings, and an annual inflation rate rise of 2 per cent which is the Bank of England target. When people argue we will see 8 – 9 percent house price inflation they are fooling themselves.

Given the current flat housing market we anticipate more people will consider taking home reversion plans.