We are grateful to the editor of the African Journal of Estate and Property Management for publishing our latest article on the profitability (or rather, lack thereof) of ERM loans to lenders. The article is available here:
“On the Profitability of Equity Release Mortgage Loans.” (K. Dowd and D. Buckner) African Journal of Estate and Property Management. September 2021.
It just gets worse and worse for lenders. First, we discovered that ERM loans to male borrowers were loss making over a large range of ages. Then we discovered that ERM loans to female borrowers were worse, and now it turns out the ERM loans to borrower couples are worse still. Here is the main chart from the article:
Projected Annualised Returns to Lenders from ERM Loans
The chart shows the return to the lender against borrower age. ERM loans to single males are unprofitable for ages below 70, those to single females are unprofitable for ages below 76, and those to borrower couples of the same age are unprofitable for ages below 80.
Oh dear.