Equity release market growth slowed in first six months of 2019

Growth in the equity release market in the UK has slowed with the volume and value of equity released showing relatively modest growth in the first half of 2019, according to the latest figures to be published.

Average loan amounts dropped nearly £2,000 to £76,064, the figures from the market monitor report from independent equity release advisory firm Key also shows.

However, overall there was a 5.6% increase year on year in the number of plans to 22,126 while total value released edged up by 3% to £1.682 billion.

The firm says that the figures suggest that while older home owners released nearly in £9.3 million in property wealth a day in the first six months of the year, the sector is reacting to current economic conditions seen across the property market and growth has slowed.

Average loans taken by customers slipped in value by nearly £2,000 to £76,064 compared with the same period a year ago as the market stabilised in the face of continued political and economic uncertainty.

Once potential further advances of £706 million on drawdown are taken into account, it suggests that the first half of the year recorded total borrowing of £2.38 billion driven by new funders entering the market and historically low interest rates.

These rates, which start from 3.21%, are also encouraging more customers to remortgage their plans to save money or release additional funds and around 5% customers changed plans in the first half of 2019 compared with 1% in 2018.

Up to half of all customers used equity release to repay debt either in the form of mortgages at 20% or unsecured debt at 30% as people increasingly looked to housing equity to shore up their finances.

The biggest single use of property wealth remains home or garden improvements at 64% as older borrowers look to age proof their homes in order to remain in them longer while 28% made gifts to family typically to help with house purchases or weddings.

Will Hale, chief executive officer at Key, said:

‘Against the backdrop of economic uncertainty, the equity release market has seen a subdued first half with slower growth than in recent years. While the key market drivers of low pension saving and substantial property wealth remain, the over 55s are taking a cautious approach to accessing the value tied up in bricks and mortar at the moment but as confidence returns we do expect the market to pick up.

‘That said, the market is benefiting from the arrival of new sources of funding which is helping to keep rates at historic lows and to drive the launch of various new products. Consequently, we have seen an increase in the number of customers remortgaging to benefit from lower rates or the opportunity to release additional equity due to house price rises or the higher LTVs that are now available.’

He pointed out that drawdown plans remained the biggest sellers accounting for 73% of all sales with enhanced drawdown which offers better terms for people with health or lifestyle conditions accounting for 22%. Lump sum lifetime mortgages made up 27% of sales, including 10% of enhanced plans.

Hale added:

‘The myriad of different reasons that customers use equity release for highlights how vital specialist independent expert advice is to ensure that older home owners are helped to make the right choices for their individual circumstances.’

Key’s market monitor, which analyses data reflecting both Equity Release Council members and non-members, found the biggest increase in value released was in Northern Ireland where total value rose by 26% with Wales seeing gains of nearly 23%.

Regions which recorded slight falls in total value released such as East Anglia, London and the South East all saw an increase in plan sales. Only the East Midlands saw a marginal drop in value released and plan sales.

Wales saw the biggest rise in plan sales at 23% with the West Midlands recording an increase of more than 20%. Other areas seeing double digit sales increases included Northern Ireland, the North West, the North East and Yorkshire and the Humber.

Chris Knight, chief executive of Legal & General Retail Retirement, believes that there is still much more potential for this market to be even bigger.

Chris Knight said:

‘Britain’s over 55s own a trillion pounds of housing wealth and providers must innovate to meet the needs of these older home owners.

‘That means offering different ways for customers to access their housing equity and at Legal & General we continue to develop new options including lifetime mortgages that pay a monthly fixed income.’


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