Equity release markets recover after initial lockdown impact
2 September 2020
Initial decline in Equity Release during lockdown
The latest report by the Equity Release Council (ERC) shows that equity release declined during the start of the year’s second financial quarter (Q2), as the UK went into lockdown. The climax of the coronavirus pandemic caused uncertainty within vocational, financial and personal spheres alike, with people pausing and assessing their situation before making big decisions.
The ERC found that: ‘The 7,341 new equity release plans taken out between April and June was the lowest seen in any quarter in the past four years since Q2 2016 (6,671) down from 11,079 in Q1 2020’. The quietest month was May: ‘with just 2,229 completions compared to an average of 3,693 per month during Q1 2020 (a 40% drop).’
The decrease amongst returning customers was even more stark, down 43% between April and June compared with January to March, dropping from 9,805 to 5,608.
Equity Release market bounces back
Despite the initial slow start to the second quarter, the equity release market is now picking up pace again. The ERC’s report stated: ‘with England’s housing market reopening in mid-May, the number of new plans completed recovered slightly in June to 2,579’.
Another positive sign was that within drawdown lifetime mortgages, the average first instalment was practically unmoved from the quarter before, going from £68,492 to £68,606.
The report was important in highlighting that although it dipped during the start of lockdown, equity release is picking up again, in line with the wider housing market.
Reasons for the fall in Equity Release during lockdown
Although the market is picking up again, the initial fall can be attributed to two reasons:
- Uncertainty: At the start of lockdown, no one was certain how events would unfold; accordingly, people chose to hold off making big financial decisions. Since the markets and future have become more predictable, people have started to renew their confidence in the housing market.
- The equity release sector being unable to move: During the height of lockdown, surveyors were unable to go out to value houses and lawyers were unable to perform the face-to-face authentication that is required to complete a mortgage. These two factors put a halt on any new business being initiated. Therefore, a great deal of the initial fall in equity release can be attributed to the pause in business while the industry adapted to offering equity release while abiding by government guidelines.
Reasons for Equity Release picking up
- Social distancing solution for Equity Release: Once the equity release sector came up with a way to conduct safe, socially distanced consultations, more business was able to be established. All of our expert advisers follow the latest health advice, including: keeping social distance – outside if necessary; minimising touch points; following government guidelines; double checking you are well before we visit you; postponing any appointments should our advisers feel unwell.
- General increase within the housing market: The latest UK Residential Market Survey (June 2020) by the Royal Institution of Chartered Surveyors reported that recovery is now underway in the housing market; this is reflected within the subdivision of equity release.
- Changed personal finances: Coronavirus has caused financial strain for many people, or their loved ones. Many are now opting to release equity to help see them through a financially harder time or to help friends and family who might be struggling.
Good news for the Equity Release sector
Founder and Managing Director of 55Plus Release, Jan Johnson, commented: “It is great to see that the equity release market is starting to pick up again. It is understandable that at the height of lockdown people were apprehensive about making big financial decisions, but I am glad that the economy is picking up and people are displaying a renewed faith in the housing market. Much credit is due to the equity release sector, who moved quickly to find solutions to help people achieve their financial goals, especially in these challenging times.
At 55Plus Equity Release, we understand that meeting an advisor might be daunting, especially if you are older. That’s why we have implemented all the safety procedures necessary to ensure that our advisors are upholding COVID-secure standards. We’re always happy to meet you outside if you’d prefer; that way we get to enjoy the British Summer as well – what a bonus!”
The equity release market is starting to pick up again, with property wealth providing a solution for many people whose financial situation has been changed by the coronavirus crisis. If you wish to discuss releasing equity with an expert, one of our advisors will always be more than happy to help.