Equity release continues its growth in the UK, reaching new highs at end of 2018

Some £136 of housing wealth was unlocked every second between October and December in the UK, as the equity release market continued its strong growth, new figures show.

Overall, older home owners unlocked a record £3.94 billion of property wealth during 2018 and an unprecedented £1.08 billion in the fourth quarter of the year, according to the latest data from the sector’s trade body, the Equity Release Council.

Of the 83,000 customers who accessed equity from their homes during 2018, over 46,000 were new customers including nearly 13,000 in the final quarter and the ERC says that the sector is being boosted by product innovation and safeguards.

The busy end to the year saw 12,891 new equity release plans agreed between October and December, contributing to an annual total of 46,397. Both these figures represent new highs and increases of 25% year on year, as more consumers look to wealth built up in property to support their finances beyond the age of 55.

Total lending activity for 2018 grew for a seventh consecutive year to reach £3.94 billion, up 29% year on year, with £1.08 billion of housing wealth unlocked in the final three months. This was the most activity seen to date on either a quarterly or annual basis.

The 46,397 new plans agreed in 2018 via council members were more than double the 22,749 seen three years ago in 2015, and four times the 11,484 seen over the course of the 1990s when consumer focused industry standards were first established.

Growth in the popularity of equity release products has been fuelled by a wide range of new product features and flexibilities appearing on the market. As of August 2018, some 139 product options were available to consumers, more than double the 58 seen two years ago in 2016 and up from 24 in 2007.

These include options to receive regular monthly income from housing wealth to boost other sources of retirement funds, such as the state pension and private pension savings, options to pay interest each month rather than rolling up interest with no risk of default, options to make voluntary capital repayments free from early repayment charges and flexibilities for customers wishing to downsize in future or guarantee a minimum inheritance to leave behind.

The report also shows that average withdrawals remained stable year on year as home owners released equity in moderation to fulfil their financial needs. Drawdown products were chosen by 65% of new customers during the quarter while 35% opted for lump sum products.

David Burrowes, chairman of the Equity Release Council, said:

‘The equity release market continues to experience sustained growth as it proves a vital tool for consumers looking to make the most of their financial resources in later life. Older homeowners are realising in growing numbers that property wealth can play a crucial role in supporting their retirement alongside pensions, savings and other assets.

‘Industry, regulators and Government must continue to explore how we can help generations of retirees, both today and in the future, to adopt a more rounded approach to later life planning. Equity release now plays a pivotal social role and the Equity Release Council will continue to ensure that products are underpinned by robust consumer safeguards.’

According to Alice Watson, head of marketing and communications at Canada Life Home Finance, it is crucial that customers continue to understand the role property wealth can play in retirement planning.

Alice Watson said:

‘Lenders have a responsibility to innovate and support advisers in the growing market. But the future success of equity release relies in large part on the sector pulling together to demystify the products and features, and continuing to win consumer confidence.

‘These are historic figures for the equity release market. If the industry continues to work together to meet evolving needs, customers and advisers will continue to act as the engine for growth.’


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