Equity release market sees strong end in 2020
Equity release is among the most popular ways of releasing money when you approach or are in retirement age. But has the pandemic had an impact on the market as a whole, or has the equity release world seen people still taking advantage on any tied up cash they might have?
A recent study undertaken by equity release specialists at Equity Release, has shown that although 2020 was a difficult year, homeowners have still been releasing equity, often with a view of rebuilding their financial resilience.
How did the year end?
According to the report, older homeowners released more than £3.4 billion in property wealth in 2020. With the ongoing pandemic, you may have thought the year would have ended a little differently for the equity release market, but it was quite the opposite. The business saw a strong end to the year, with 9,930 people releasing over a staggering £1.1 billion in the last quarter of 2020 alone.
Although there was an overall annual decrease of 12.5% in plan sales, it seems that customers are still looking to keep their finances strong, with many focussed on meeting immediate and more pressing needs rather than the usual discretionary spending.
Will Hale, CEO at Key said: “Discretionary spending has fallen as equity release increasingly looks to support clients’ aspirations to help their families and make their finances as resilient as possible by refinancing debt. While most people aspire to reach retirement without any mortgage or unsecured debt, this is certainly not possible for everyone and equity release can help to take the pressure off these families while still providing avenues for repayment.”
Why are people using equity release?
The pandemic has seen many facing challenges where their finances are concerned, and the trends found in the report corroborate with this. It seems over the past year, many have been releasing equity to refinance debt and support their wider families, especially with people being put on furlough or facing redundancy.
It may not have been what older homeowners would have wanted to spend their money on, but Equity Release have seen the average amount of money gifted to people’s wider families increase by 9.2% YoY.
How do the different regions in the UK compare?
Thanks to the introduction of their innovative Market Monitor, Key Advice are able to take a more accurate picture of which regions are seeing rises and dips in equity release and spending. According to the data, the South East was the only region to see a rise (1.3%) in the value of new equity released during 2020, with Wales seeing the biggest fall at 25%.
Who knows what 2021 will bring in the equity release market. But, with the introduction and role out of the vaccination, we may see a switch in the ways people are using their released funds.