The Equity Release Council has revealed that £698m of property wealth was accessed by older homeowners in Q2 2020, down by 34% – almost £400m – from the previous quarter.
However, it has seen initial signs of recovery in June with the easing of lockdown.
The Q2 fall mirrors wider lending trends: Bank of England data for April and May shows gross lending secured on dwellings was down 36% from February and March.
The number of new equity release plans agreed between April and June also declined by 34% from 11,079 in Q1 2020 to 7,341.
David Burrowes, chairman of the Equity Release Council, said: “Equity release market activity continued to mirror wider economic conditions, with the confidence of early 2020 giving way to caution as households assess the impact of coronavirus on everyday life.
“Careful precautions have kept the market open to those who wish to choose the option of equity release and ensured customers have access to property wealth to help meet important financial and social needs. That said, the fall in the number of new plans and fewer returning customers accessing extra funds are clear signs of people pausing to see how the wider situation unfolds.
“Property assets have long been one of the nation’s main sources of wealth and are likely to play an increasingly important role to support people when addressing the challenges facing many in later life, including bridging the savings gap for older homeowners who are asset rich but cash poor. Releasing equity is not a suitable choice for everyone, and our focus is on ensuring customers’ interests are protected at every stage of the process through structured financial advice, independent legal advice and clear product safeguards.”
Dave Harris, CEO of more2life, added: “Today’s findings highlight the direct impact coronavirus has had on the housing market with the later life lending sector being no exception. The fall in equity release market activity during Q2 reflects the trends seen more widely across the UK, with many consumers spending less, particularly when it comes to large purchases, meaning the need to borrow has lessened. Indeed, more2life’s latest research found that the over-55s in particular are set to borrow £19bn less over the next two years as they respond to the disruption caused by coronavirus.
“However, while some older homeowners will look to take a more cautious approach to borrowing over the short-term, others will need to look at all their assets as they carefully plan their finances. The later life lending sector has worked hard to keep the market open during these unprecedented times, ensuring borrowers who need to access their housing equity have been able to do so.
“Overall, the strong underlying trends that have driven the lifetime mortgage market in recent years remain and we would expect to see a gradual return to pre-crisis lending volumes later this year. As we start to emerge from the crisis, it is vital that our industry continues to support and champion advisers as they provide valuable advice to customers who need it now more than ever.”