Equity release market experiences busy autumn
30 December 2019
A busy autumn for equity release
The Equity Release Council (ERC) publishes regular market reports1 based on member activity, which represents over 95% of the equity release market. Its latest analysis shows that July to September 2019 saw a big increase in equity release activity, with equity release products providing £988 million of funding to older homeowners, up from £911 million from April to June. More than 11,419 new customers opted to release equity from their homes to help them realise their retirement dreams during the third financial quarter of the year, up 6% from the preceding three months.
The equity release year so far
The ERC’s figures show that so far this year more than 33,000 new customers have opted to release equity from their homes; this is more than the total number of new plans for any full year from 1991 to 2016. While the busiest three quarters in equity release have all occurred since July 2018, average withdrawal values have remained fairly constant, despite the market growing:
Average equity release withdrawal values1
Average first instalment of a drawdown plan
Average lump sum plan
Reasons for equity release
According to the ERC, equity release applications continue to be made for a variety of reasons, including meeting day-to-day expenses, gifting to friends and family, making home improvements and meeting one-off expenses.
However, customer research by Canada Life suggests that nearly half (49%) of equity release customers in Q3 used the wealth in their homes to pay off an existing mortgage, up 14% from the same period in 20182.
Canada Life’s customer information also showed that many homeowners aged 55 and over are using their property wealth to improve their quality of life in retirement:
- 41% of applicants were using equity release for home improvements to add value to their home or to increase their enjoyment of their property
- 21% were releasing property wealth to pay for holidays
- 13% used equity release to buy a car
Pension or property wealth?
Interestingly, Canada Life has conducted additional research into people’s attitudes towards their retirement wealth3. Two thirds of people questioned said they thought their pension was worth less than their property, with 52% saying their pension was worth a lot less – up 11% from 2016. 28% of those questioned said they would rely on both their pension and their property to fund their retirement.
Equity release a key element of retirement finances for many
“The fact that the three busiest quarters in the equity release sector have all occurred in the last 15 months, combined with people’s increasing perception that property is a key element of their wealth in retirement, reinforces that property wealth is going to continue to play in increasingly important role as we work out how to finance our retirements as more of us live longer,” comments Jan Johnson, director of 55+ Equity Release.
If you think releasing equity from your property could be part of your financial solution in your retirement, our equity release advisers will be happy to talk you through the options, with advice tailored for your personal circumstances and goals.