Equity release market approaching £4 billion

2018 saw retired homeowners release £3.6 billion in new property wealth, with the market doubling in size in just three years, according to new data from equity release adviser Key.

When further advances and additional drawdown are taken into account, the market is getting close to £4 billion, the firm said.

Homes paid out nearly £10 million a day in 2018 with customers releasing an average £76,500 to improve their standard of living in retirement.

Plan sales rose by 21% in the year to 47,081 and new lending increased by £586 million to a new record high of £3.6 billion – more than double the £1.71 billion level achieved in 2015, Key’s 2018 Equity Release Market Monitor shows.

The number of customers using money to help families rose to 27% from 24% the previous year. Key’s figures show other major uses of gifts are to pay for large family holidays, fund university fees or buy cars.

The most popular use remains funding home and garden improvements with 64% re-investing some or all the money in their houses – often to ‘age-proof’ the property. 33% paid for holidays and 31% used some or all the cash to clear credit cards or loans while 22% paid off existing mortgages.

All areas of the country recorded strong growth in plan sales and value released with Londoners receiving the biggest cash boost at £136,850. Total value released in the South East during the year exceeded £1 billion for the first time.

Drawdown plans remained the biggest sellers accounting for 64% of all sales, including 15% in enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions. In 2018, customers reserved £1.46 in funds using these products. Lump sum lifetime mortgages made up 36% of sales, including 13% of enhanced plans.

Will Hale, CEO at Key, said: “The equity release market recorded another strong year of growth in new lending taking it to £3.6 billion and has doubled in size in three years demonstrating how important it is to retirement planning. Once further advances and additional drawdown is included it is getting close to £4 billion.

“The growth in gifting highlights the intergenerational benefits of equity release for families with money being used to clear debts, fund university fees and pay for house deposits and weddings. Even the use of equity release to fund home and garden improvements has benefits for families as it helps people to ‘age-proof’ their home and preserve wealth for the family.

“Debt remains however a major issue for some retired people and substantial numbers are relying on equity release to clear credit cards and loans as well as paying off mortgages. Good specialist advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”

Key’s Equity Release Market Monitor, which analyses its data reflecting both Equity Release Council members and non-members, found the biggest increase in value released was in Scotland where total value rose by nearly 38%. The West Midlands, Yorkshire & Humberside and Wales all recorded major gains.

Northern Ireland saw the biggest increase in plan sales with a 47% rise during the year while the North East, West Midlands and Yorkshire & Humberside all saw strong increases year-on-year.

David Burrowes, chairman of the Equity Release Council, said: “The modern-day equity release market is serving a vital social purpose, by helping thousands of older homeowners and their families to use property wealth to support their financial goals. Consistent growth in recent years has been driven by increased product flexibilities and innovation to meet a variety of consumer needs.

“Intergenerational support remains a key usage, which highlights the important role that equity release now plays in the later life landscape on both an individual, family and societal level.

“Today’s market is built on a combination of increasing choice and robust consumer safeguards. Looking ahead, it is important that this is maintained as the range of later life products continues to grow. It is vital we encourage customers to consider all available options in terms of their wealth and assets to get the best outcomes from a rounded approach to retirement planning.”

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