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Equity release market resilient despite Covid

3 February 2021

The equity release market remained resilient through 2020 despite facing extraordinary challenges, say industry commentators, as the latest figures showed total lending across the market was just 1% lower than 2019. 

A total of 40,337 new plans were agreed in 2020 compared with 44,870 in 2019, according to the latest figures from the Equity Release Council, with pent-up demand and low pricing boosting market recovery in the fourth quarter.

Pricing saw the average equity release interest rate fall to 4.01% midway through the fourth quarter, with the lowest rates at 2.30% – less than the average 10 year fixed rate mortgage.

The Equity Release Council said a backlog of cases from earlier in the year contributed to a busy year-end as 11,566 new equity release plans were agreed by over-55 homeowners in the final quarter, with October witnessing the biggest number of cases completed as the market bounced back from the initial spring lockdown.

Across 2020 as a whole, £3.89 billion of property wealth was released by new and returning customers, down from £3.92 billion in 2019 and £3.94 billion in 2018. The disruption of the Covid-19 pandemic led to over half (57%) of lending activity taking place in the first and final quarters of 2020.

Stephen Lowe, group communications director, Just Group, said: “Today’s data on the equity release market reflects the rollercoaster ride we all experienced last year, but also highlights that demand for equity release plans is underpinned by real consumer needs.

“The fact that the year ended with total lending across the market just 1% lower than 2019 is remarkable in the circumstances. Most importantly, the industry has found ways to continue serving customers and prompted some genuinely innovative thinking at a time when it seemed like the world might be grinding to a halt.”

Will Hale, CEO, Key, commented: “The figures demonstrate the continuing resilience of the market despite the challenges of the pandemic. The strong demand from new and existing customers highlights the importance of the use of housing equity in supporting customers through later life. Equity release is increasingly supporting customers as they look to help their families and to make their finances as resilient as possible.”

Key’s own market monitor showed that mortgage refinancing (29%) and gifting (22%) were key reasons for customers releasing funds as people focused on financial priorities rather than more aspirational drivers.

Alice Watson, head of marketing, insurance, Canada Life, said the figures demonstrated the industry’s “remarkable resilience” and said there remains optimism going forward.

Watson added: “From surveying equity release advisers, we know that there is a lot of optimism in the industry. In fact, 72% of advisers expect the value of the equity release market to grow even further this year, mainly driven by younger customers and an appetite for larger loans. While we are not yet at the levels of activity seen before the pandemic, 60% of advisers feel that Q2 2021 will see a return to pre-pandemic business.”

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