Key: Equity release market picks up in Q4 2019

Michael Lloyd

January 17, 2020

While the total value of property wealth released last year dropped from that of 2018, the equity release market picked up Q4 according to Key’s Equity Release Market Monitor.

Retired homeowners released more than £3.4bn of property wealth in 2019, down 4% from 2018’s £3.6bn and the number of new plans taken out slipped by 3% from 47,081 to 45,598 last year.

However, Q4 saw signs of a return to growth with £921m released compared with £887m in Q3 and a rise in plan sales to 11,820 from 11,722.

Will Hale, chief executive at Key, said: “2019 has been a busy year for the sector, there are now more funders than ever before in the market and more than 300 different plans as well as growing consumer interest.

“That said, we did not see the continued double digit growth that we have seen in recent years as consumers – unsettled by current economic and political events – chose to defer decisions around how housing equity might help them in later life.

“Although we saw small year-on-year falls in the value and volume of equity release taken out, the last two quarters were more upbeat and we start the year with a positive headwind fuelling the belief that we will continue to see growth in the equity release market.

“There are more than 24 million over-55s in the UK so market drivers remain strong and as consumer confidence grows we will increasingly see more people looking to take advantage of the innovative new products and continued low rates.

“Indeed, 2020 has the makings of a very interesting year for the equity release market but we need to continue to focus on educating and engaging with key audiences to clearly highlight how housing equity can play a role in meeting the challenges that individuals and the country as a whole face.

“Boosting retirement income, helping people to pay for social care at home and helping the younger generation onto the property ladder are all positive outcomes delivered by taking a holistic approach to managing your assets in retirement.”

Sales of drawdown plans accounted for 73% of the market last year, up from 64% in 2018.

There has been a rise in the number of products on the market, with lenders launching more products which offer drawdown as a feature.

Enhanced drawdown which offers improved terms to customers with health or lifestyle issues accounted for 20% of sales compared with 27% for lifetime mortgages in total.

Around 29% of equity release customers in 2019 used some or all of the cash to pay off loans or credit cards whilst 20% used money to clear existing mortgages.

The numbers of customers switching from existing equity release plans to take advantage of historically low interest rates also rose from 4% in 2018 to 5% last year.

Northern Ireland saw the biggest rise in value released at nearly 17% year-on-year and in plan sales at more than 9%.

Wales saw value released rise by nearly 10% and plans sales by almost 8% while the West Midlands recorded gains in value released of around 11% and plan sales by almost 7%.

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