The fourth quarter saw the highest amount of property equity released in 2019, but political and economic uncertainty saw overall year-on-year plans and value released drop, according to the latest figures from Key.
Retired homeowners released more than £3.4 billion of property wealth last year, a 4% drop on the £3.6 billion released in 2018.
The data showed that 45,598 new plans were taken out in 2019, down from the 47,081 recorded during the previous 12 months, as consumers grew cautious. While homeowners released close to £9.5 million of property wealth a day in 2019, the average amount released slipped to £75,631 from £76,473 in 2018.
However, the last quarter of 2019 saw signs of a return to growth, with £921 million released compared with £887 million in the third quarter, suggesting confidence in the market is on the rise, the equity release specialist said.
Key’s Market Monitor showed that Northern Ireland, the West Midlands and Wales saw the strongest growth. Northern Ireland recorded the biggest rise in value released at nearly 17% year on year with plan sales up more than 9%. Wales also saw the value released rise by nearly 10%, and plans sales by almost 8%.
Rise in drawdown
Sales of drawdown plans also rose over the course of 2019, accounting for 73% of the market compared with 64% in 2018.
Key said an increase in the number of new products available with a drawdown feature was a driving factor, offering some of the best rates and greatest flexibility.
Enhanced drawdown accounted for 20% of sales during the year.
How the money was used
Nearly one in three (29%) equity release customers in 2019 used some or all of the cash to pay off loans or credit cards, while a fifth used the money to clear existing mortgages.
The number of customers switching from existing equity release plans to take advantage of low interest rates also rose 5% in 2019 compared with 4% in the previous year.
Home improvements continued to be a popular use, with 64% of customers using some or all of the money to make changes to their property. Meanwhile, almost a third (32%) were able to fund holidays with some of the money they released and gifting to family was also the motivation for 28% of customers.
Will Hale, CEO, Key, said: “There are now more funders than ever before in the market and more than 300 different plans. That said, we did not see the continued double digit growth that we have seen in recent years as consumers chose to defer decision around how housing equity might help them in later life.
“Although we saw small year on year falls in the value and volume of equity release taken out, the last two quarters were more upbeat and we start the year with a positive headwind fuelling the belief that we will continue to see growth in the equity release market. There are more than 24 million over-55s in the UK so market drivers remain strong and as consumer confidence grows we will increasingly see more people looking to take advantage of the innovative new products and continued low rates.”
Looking ahead to the coming 12 months, Key says it has the hallmarks of a “very interesting year,” but the focus must be upon educating and engaging with key audiences to highlight the benefits of releasing property wealth.
