Property & Mortgages

UK equity release market dips four per cent to £3.4bn


Retired homeowners released more than £3.4bn of property wealth last year, a four per cent drop on the £3.6bn released in 2018, shows data from Key

The UK equity release market ended on a high as the fourth quarter saw the highest amount of equity released in 2019, according to the latest data released by Key. However, year-on-year plan sales and value released fell, with retired homeowners releasing more than £3.4 billion of property wealth during 2019, dropping 4% from £3.6 billion in 2018. This drop is believed to be largely due to political and economic instability.

The number of new plans taken out slipped by 3% from 47,081 to 45,598 last year. However, there were signs of growth in Q4 as £921 million was released during the last three months compared with £921 million in Q3 and a rise in plan sales to 11,820 from 11,722 suggesting a rise in consumer confidence.

Homeowners released nearly £9.5 million of property wealth a day in 2019 but caution among consumers and the dominance of drawdown saw the average amount released slip marginally to £75,631 compared with £76,473 in 2018.

Sales of drawdown plans accounted for 73 per cent of the market last year compared with 64% in 2018. The total market, including unused drawdown facilities, was worth £4.9 billion in 2019 compared with £5 billion previously.

In 2019 drawdown accounted for 73% of new business, up by 9% from 64% in 2018. As lenders are offering more products with the drawdown feature, customers are preferring products with a drawdown feature as they offer some of the best rates.

Enhanced drawdown which offers improved terms to customers with health or lifestyle issues accounted for 20% of sales compared with 27% for lifetime mortgages in total (8% of which was enhanced).

Around 29% of equity release customers in 2019 used some or all of the cash to pay off loans or credit cards while 20% used money to clear existing mortgages.

The numbers of customers switching from existing equity release plans to take advantage of historically low interest rates also rose to 5% in 2019 compared with 4% in the previous year. With more than 300 products available and ongoing product innovation advisers are likely to continue to see growth in rebroking in 2020.

Almost a third (32%) used some of the cash they released to fund holidays. Gifting to family continued to be an important motivation for equity release with 28% of customers helped out family from their property wealth in 2019.

Meanwhile, strong growth continued in Northern Ireland, the West Midlands and Wales while the North West also saw an increase, according to Key’s Market Monitor, which analyses data reflecting both Equity Release Council members and non-members.

Northern Ireland saw the highest equity release at nearly 17% year on year and plan sales at more than 9%, while value released increased by nearly 10% and plans sales by almost 8% across Wales, and the West Midlands recorded gains in value released of around 11% and plan sales by almost 7%.

CEO at Key, Will Hale, said that 2019 has been a busy year for the sector, there are now more funders than ever before in the market and more than 300 different plans as well as growing consumer interest. That said, they did not see the continued double digit growth that seen in recent years as consumers – unsettled by current economic and political events – chose to defer decisions around how housing equity might help them in later life.

Hale added that although there have been small year on year falls in the value and volume of equity release taken out, the last two quarters were more upbeat and the year starts with a positive headwind fuelling the belief that growth in the equity release market will continue. There are more than 24 million over-55s in the UK so market drivers remain strong and as consumer confidence grows there will be more people looking to take advantage of the innovative new products and continued low rates.

Risk Warning:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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