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Latest equity release figures show market has slowed but providers say consumer interest remains high

31 July 2019

While Equity Release Council figures show market growth has slowed, impacted by the uncertain economic landscape, providers point to lower rates and innovations keeping consumer interest high.

Figures released by the Equity Release Council, which show the UK equity release market reached £1.85 billion in the first half of the year, on par with the first half of 2018.

This represents year on year growth, with over 7,000 new drawdown plans taken out in Q2 2019, up 5% from Q1 2019 but just 2% from Q2 2018.

And earlier this month, equity release provider Key published its 2019 Market Monitor showing that while older homeowners released nearly £9.3 million in property wealth a day in the first six months of the year, the modest growth was in reaction to the current conditions seen across the property market.

In addition, the monitor showed that average loans slipped in value by nearly £2,000 to £76,064 compared with the first half of 2018.

The report also found half of all customers used equity release to repay debt, either in the form of mortgages (20%) or unsecured debt (30%). The biggest single use of property wealth remains home or garden improvements (64%), while 28% made gifts to family, typically to help with house purchases or weddings.

Will Hale, CEO, Key, said: “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.”

Positive signs

Commenting on the Equity Release Council numbers, Alice Watson, head of Marketing and Communications at Canada Life Home Finance, said while they showed the market was on a par with the first half of 2018, “a drop in new lump sum lifetime mortgages to the lowest level seen over the past year, suggests the market has slowed, possibly in response to the political uncertainty in the UK.”

But she added, the slight dip in performance would likely “be temporary” as homeowners took stock of the current political climate.

And, she said, the sector shouldn’t ignore that the number of homeowners considering their property wealth alongside other assets “remains high”.

“There is still a chance 2019 might break records, as the numbers also suggest that the popularity of the product is increasing, with the number of customers drawing down from existing lifetime mortgages growing over the quarter.

“To meet this increased demand, we need to ensure that advisers have the right tools at their disposal to help customers with their lifetime mortgage needs.”

Stephen Lowe, group communications director at Just Group, added that the growth in purchases of lifetime mortgage drawdown solutions reflects the changing needs of people, who are increasingly using the wealth stored in their property to support their later life.

“There are a number of reasons people want to access housing wealth. In the past it was often used to fund big one-off purchases or home improvements, whereas now we observe people using equity release as an asset, just like a pension or investment, to provide retirement income or cover the costs of long-term care.”

Also, as the market continues to evolve, new innovations are being introduced which should provide solutions to new customer segments, he said. “Products such as Just Group’s interest-serviced lifetime mortgage provides flexibility and choice for those customers with excess income but who need to generate a lump-sum, often to provide support for younger family members. These innovations extend equity release to a wider group of customers.”

 

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