The average rates for equity release products fell to a record low of 4.48%, with 40% of plans offering rates below 4% – an all-time low for the equity release industry, the Equity Release Council’s (ERC’s) Spring 2020 report has revealed.
Older homeowners unlocked nearly £4bn of property wealth in 2019 whilst product options surpassed 300 as choice increased 42% in the past year.
David Burrowes, chairman of the Equity Release Council, said: “Hopes that the UK would leave behind the political and economic uncertainty of 2019 have been rapidly overtaken in recent weeks by the national and global response to the coronavirus outbreak.
“Reflecting on 2019, the equity release market remained robust, as for a second year running older homeowners unlocked nearly £4bn of property wealth.
“While uncertainty becomes the norm, property wealth will inevitably continue to play a role over the months and years to come, to help meet the wide-ranging needs of the UK’s ageing population.
“The increasing diversity of firms in the market reflects the wide range of consumer needs which property wealth is helping to address. It is also a sign of the greater frequency with which the option of releasing equity is coming up in retirement planning conversations.
“Equity release is a long-term commitment that can only be made after careful consideration, regulated financial advice and independent legal advice.
“Strong consumer safeguards will continue to ensure equity release is chosen for the right reasons, with applications vetted prudently and carefully by weighing up both short and long-term needs.”
The second half of 2019 saw equity release activity pick up after a quieter start to the year, as a degree of clarity returned to the UK political and economic landscape.
Having dropped back in H1, the total number of new and existing customers using equity release products to access their property wealth returned to growth in H2.
Between July and December, 44,234 customers were served, compared with 41,263 between January and June – mirroring the seasonal pattern seen in previous years.
The number of new plans agreed in the second half of the year remained 7% lower than in H2 2018 but was 15% higher than two years previously in H2 2017.
Stephen Lowe, director of retirement specialist Just Group said: “It’s unsurprising to see more people in later life using some of their housing assets to improve their later life or the lives of their families. After all, people aged 55 and above own housing wealth worth over £3.2trn.
“Our priority today is to ensure families can maintain access to their money during the pandemic. We have rapidly changed the way we deliver services to advisers and their clients to ensure our doors remain fully open for business.
“Within days all of our 1,000+ colleagues were working remotely with full access to all our systems; we changed our policies and procedures such as the approach to valuations; signatures; electronic communications and access to medical records and legal advice to ensure we removed barriers created by the government’s social distancing instructions.
“Families can feel confident that Just and other participants across the industry are being agile to keep services open.”
Dave Harris, chief executive officer at more2life, added: “Today’s ‘During These Unprecedented Times’ report highlights the relative stability of the equity release market as the financial services industry faces its biggest challenge since the credit crunch.
“The Equity Release Council’s (ERC) findings show that almost two-thirds (63%) of customers are choosing drawdown products as opposed to lump-sum plans, and an increasing number of homeowners are opting for products with modern lending features such as interest-serviced options.
“Product flexibility has always been high on the agenda for more2life as we believe this is vital in order to help advisers find the right products for their clients’ unique circumstances.
“Given the current situation this type of flexibility will be even more important to those consumers who want to use equity release in later life.
“Flexibility is also needed by advisers as they seek to service these customers and more2life was proud to be the first volume lender to bring semi-automated valuations to the market.
“Technology and innovation also remain a priority and something that we are confident will help to keep the market moving.”
Alice Watson, head of marketing, insurance, Canada Life, said she welcomed the report in what are clearly difficult times.
She added: “Despite some of the challenges the sector is facing today as a result of coronavirus, it’s welcome news to see the later life lending sector end 2019 on a high.
“Increasingly flexible solutions, combined with competitive rates are giving the over-55s the opportunity to tap into their property wealth in a number of ways. This includes guaranteeing inheritance to leave to loved ones, accessing a cash reserve facility or even making penalty free repayments.
“It’s encouraging to see that customers are increasingly aware of how the equity stored in their homes can help them enjoy the retirement they’ve worked long and hard for, whether that be to supplement retirement income, make home improvements or even support family members.
“As more advisers enter into the later life space, we expect to see equity release play a bigger role as part of a blended retirement plan.
“Ultimately, it’s our responsibility as an industry to continue working together to provide innovative solutions to meet the needs of today’s retirees.”