The Equity Release Council has released market figures for Q4 2020.
Annual lending to new and existing customers totalled £3.89bn, highlighting the fact that the equity release market has managed to stay strong despite the Covid pandemic.
The lockdown-related backlog of cases led to a busy year-end as 11,566 new equity release plans were agreed by over-55 homeowners in the final quarter.
October saw the most cases completed as the market bounced back from the initial spring lockdown
However, the Council said that caution remains as 2020 finished with 10% fewer new plans agreed than 2019, while 11% fewer customers sought further advances and 21% fewer made drawdowns from existing plans.
Favourable pricing saw the average equity release interest rate fall to 4.01% midway through Q4 2020, with the lowest rates at 2.30% – less than the average 10 year fixed rate mortgage.
David Burrowes, chairman of the Equity Release Council, said: “These figures offer encouraging signs of market resilience after a year that presented huge challenges to household finances and business operations.
“Over the last decade, releasing equity to boost your finances in later life has grown from a niche pursuit to a competitive market that has stabilised at £3.9bn of lending activity for the last three years, despite significant headwinds driven by Brexit uncertainty and the Covid-19 pandemic.
“The unusual patterns of activity in 2020 show some customers biding their time before accessing property wealth. New plans were delayed from earlier in the year and fewer customers have made use of drawdown reserves or sought extensions of existing loans. Releasing equity is not an overnight decision and should only be entered into after considering all alternatives.
“In the right circumstances, access to fixed lifetime products at lower rates than the average 10-year mortgage is a big factor in the appeal of modern-day equity release, as is the flexibility to pay interest or repay capital for many products to keep total costs in check. Ten years of transformation have made equity release an important financial planning tool that is increasingly valued by our ageing population.”
David Stevens, director of savings and retirement at LV=, added: “Despite the challenges that the Covid-19 pandemic and lockdowns had presented last year, it is encouraging to see that the equity release market has bounced back in Q4. More customers are considering equity release as a mainstream option to help fund their retirement, but rightly taking the time to ensure that they are financially and emotionally equipped with the help of a financial adviser to start the process.
“LV= research shows that more affluent customers are twice as likely to unlock equity from their homes to help fund early retirement compared to the general public (20% vs 10%).”