10 October 2022
The Continuous Mortality Investigation (CMI) has found that mortality experience for equity release mortgage (ERM) holders is at a similar level to annuitants but considerably lower than the general population for both males and females. It is likely that ERM holders have a similar socio-economic profile to annuitants leading to lower average mortality but the data was not available for this research to confirm this.
The research covers the period 2016-2019 and is the first analysis of ERM holders’ mortality by the CMI Annuities Committee. Long-term care experience was also analysed in combination with mortality and showed similar patterns to the mortality only experience, albeit slightly higher overall. When broken down by age band, the data suggested significantly higher mortality at younger ages than for both annuitants and the general population, with mortality falling as age increased.
Jamie Funnell, Chair of the CMI Annuities Committee, said: “This is the first time we’ve explored the experience of equity release mortgage holders. It’s been particularly interesting to note the differentials in experience by age when compared with annuitants and the general population. In particular, mortgages starting at younger ages saw higher mortality experience at a given attained age than those commencing at older ages. While it is too early to draw firm conclusions, this could reflect lifestyle or socio-economic differences between these cohorts, although we did not have the data to confirm this. Given this is our first analysis of ERMs and we’re using a relatively immature dataset, it is difficult say whether these differentials would continue as younger mortgage holders age. We are keen to explore this further if we repeat the analysis.”
Given the challenges of the Covid-19 pandemic, the CMI looked at 2020 data separately. While mortality rates in 2020 were higher than in 2016-2019 for ERM holders, the increase was more modest than for annuitants or the general population.
Jamie Funnell, continued: “Mortality experience for 2020 is considered to be an outlier and given the highly unusual circumstances arising from the pandemic, we felt it was important to consider this year in isolation from previous years. The more modest increase in mortality rates for ERM holders could reflect the high number of care home deaths in the general population. These care home deaths would have left the ERM dataset on entering long-term care prior to 2020 and would therefore not be represented. In addition, long-term care admissions in 2020 may have been lower due to lack of availability or reluctance to enter long-term care during the pandemic.”
~ENDS~
Sonia Sequeira, Media Relations Manager, IFoA
Tel: (+44)7525 592 198
Email: sonia.sequeira@actuaries.org.uk
1. The analysis considers mortality and long-term care experience of ERM holders. It does not include analysis of early redemptions.
2. The analysis is based on data collected from nine providers for the years 2016-2019 and 2020. This includes data from two large providers who make up a significant proportion of the dataset. In order to the reduce the proportion of one provider, which was particularly dominant, the CMI restricted the dataset to mortgages commencing in 2005 or later for all providers and applied an 80% weighting to the exposure and exits data for the largest provider. The weighing methodology is analogous to amounts weighting in other CMI investigations.
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