fbpx

ERC: Equity release market shows steady growth in Q3

Jessica Bird

October 29, 2020

property wealth equity release

The number of new equity release plans agreed in Q3 2020 was 10,351, an increase of 41% from the previous quarter, according to the Equity Release Council (ERC).

Despite this growth, Q3 remained 9% down year-on-year, from 11,419 in Q3 2019, and was the second slowest quarter (after Q2 2020) since Q1 2018.

There was a gradual increase in new customer activity during the quarter, as July saw 3,147 new plans agreed, followed by 3,228 in August and 3,976 in September.

Returning customers taking drawdowns totalled 6,697 during Q3, up 19% from 5,608 in the previous quarter but 30% below the 9,605 seen this time last year.

£963m of property wealth was unlocked in total during Q3 2020 by new or returning customers, up by 38% from Q2, but down 3% from Q3 2019.

The climb back towards pre-COVID levels of activity was influenced by an extended pipeline and delayed cases from earlier in the year; new plans agreed in the six months from April to September remained 20% below the same period in 2019.

The six months from April to September saw 17,692 new plans agreed in total, compared with 22,150 a year earlier and 23,311 during the same period of 2018.

The total number of customers – new or returning – served in Q3 2020 was 18,154, up 33% from the 13,617 in Q2 2020 but down 18% from the 22,131 customers served this time last year.

Among the 4,545 new lump sum lifetime mortgages taken out in Q3, the average loan size remained stable at £99,691. This was unchanged from the previous quarter while increasing by 4% year-on-year.

Among the 5,806 new drawdown plans taken out in Q3, the average loan size of £70,244 was similar to the previous quarter (up 2%), and increased by 11% year-on-year.

The average amount reserved for future use (£34,877) was slightly down by 7% on Q2 (£37,500) and down 6% year-on-year.

The average drawdown instalment taken was £11,424, down 12% on the £13,005 seen in Q2 and relatively stable when compared to the £11,169 average from Q3 2019.

Further advance activity recovered to the levels seen a year ago at 1,106, rising from a low of only 668 in Q2 where the property market was put on hold.

David Burrowes, chairman of the Equity Release Council, said: “These figures show a steady return to something closer to normal activity over the summer, after the market weathered the initial impact of COVID-19.

“With the country experiencing a break from lockdown, the pick-up was helped by a mix of new enquiries and delayed cases from earlier in the year.

“Equity release is a carefully considered choice, and this year’s unprecedented events make it more important than ever for people to weigh up their decisions through regulated financial advice, independent legal advice and conversations with those closest to them.

“Despite the uncertain climate, the market has adjusted well to the challenges of operating safely in a pandemic.

“Desktop property valuations have been used selectively, solicitors have taken extra steps to maintain consumer protections when advising remotely, and product pricing has remained competitive.

“Looking ahead, the key market drivers remain in place: people are living longer and retirement finances are increasingly squeezed as generous final salary pensions edge further to extinction.

“Many older households are already facing a situation where their expenses outweigh their disposable income, which makes access to property wealth an important pillar to support later life living standards.”

Dave Harris, CEO of more2life, said: “The hard work of key players in the equity release market over the past quarter has gone a long way in stimulating activity post-lockdown, as today’s figures highlight.

“It is encouraging to see that, despite the disruption caused by COVID-19, over 10,000 new plans were agreed in Q3 – a 41% rise on the previous quarter – and that new customer activity is more closely echoing that of the pre-coronavirus market.

“The sector has adapted to the challenges of the past six months and is in a strong position to continue serving older borrowers including those who may find themselves impacted by the crisis.

“While all choices around housing equity need to be made taking into account both a client’s long-term and short-term needs, it is crucial that people realise that they can use their housing equity at the moment if they need to.

“Adviser support will be key here, and it will be up to lenders to ensure that engagement and education for the intermediary community is at the top of the agenda so that they are able to help older clients with some of the more difficult financial choices they may need to make.”


Sign up to our daily email