Equity release demand continues to grow

3 August 2022

Demand for equity release rebounded strongly from the pandemic, with homeowners withdrawing £1.6 billion of property wealth in the second quarter of 2022.
New figures from the Equity Release Council showed a total of 23,910 new and returning customers withdrew wealth from their properties between April and June this year, up 515 from 23,395 in the first quarter of 2022 and an increase of 17% on the second quarter of 2021.
Homeowners aged 55 and over took out 12,485 new equity release plans during the three month period, the equivalent to 205 new plans being agreed each working day.
The Council said the number of new plans agreed during the second quarter jumped 26% year on year when compared with the same period of 2021. However, it fell short of the 12,891 recorded in the first quarter of 2018.
The data also showed more new customers opted for lump sum lifetime mortgages for the first time in 13 years, increasing from 45% of new plans in the second quarter of 2021 to 54% now.
David Burrowes, chair of the Equity Release Council, said: “The need to improve older people’s access to housing wealth was widely recognised by industry and policymakers long before the Covid-19 pandemic and current cost of living pressures emerged.
“The fact that hundreds of homeowners are now choosing to release equity each day, based on detailed financial and legal advice, is significant progress from the days when the market was considered an under-developed niche rather than the mainstream option it has become.
“The recent trend towards lump sum products is likely to be influenced by customers’ continuing desire to gift money to younger family members and share their property wealth across generations, particularly if cost of living pressures are starting to bite.”
In March, the Council launched its fifth product standard, meaning all new plans in the second quarter came with the option for customers to make penalty-free partial repayments when they can afford to.
Burrowes said the flexibility to make voluntary repayments is likely to be an important factor for a growing number of people as they look to balance the books.
Burrowes said: “The reality that interest rates have risen from historic lows will also impact people’s plans and the Council will monitor this closely as the year progresses.”
Stephen Lowe, group communications director at Just Group, said: “Demand for equity release has recovered strongly from the pandemic wobbles with the last three quarters each setting new lending records. The number of new customers is also trending higher following the pandemic as we head into the traditionally busier second half of the year.
“Clearly lifetime mortgages, which now account for virtually  the entire equity release market, are becoming a keystone of financial planning for some customers alongside their pensions and other savings.”
Lowe said the business drivers for equity release continue to be strong, with house prices continuing to rise and providers competing for business with extra features such as interest-servicing and medically underwritten rates.
Lowe added: “Locking in today’s interest rate is appealing. It’s likely some demand is from people who put plans on hold during lockdown, alongside those starting to feel a squeeze from rising household costs.”
Simon Gray, managing director at HUB Financial Services, commented: “These are by far the strongest first half figures ever seen and bode well for the rest of the year and beyond. This growth is underpinned by competitive interest rates and innovations. The result is that plans are becoming more customisable for different situations and this means advisers can personalise solutions for each unique client.”
Will Hale, CEO of Key, noted: “At a time when the UK is facing a cost of living crisis unlike anything we have seen for many years, the fact that older homeowners can use what is often their most valuable asset to help them manage their finances in late life should be celebrated.”
According to Key’s Market Monitor, 40% of equity release customers used some or all of their funds to repay an outstanding mortgage.
Hale added: “With fixed interest rates for life and the ability to make both ad hoc capital as well as interest repayments, a lifetime mortgage can be an excellent option for an older borrower.”

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