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Equity release market increased by 8% in third quarter of 2019

The equity release market increased by 8% in the third quarter of 2019 in the UK as older home owners unlocked almost £11 million of property wealth per day.

Overall, equity release products provide £988 million of funding to owners aged 55 and over and 33,000 new customers have used property wealth to support their finances so far this year.

The latest quarterly market figures from the Equity Release Council, the UK sector representative body, also show that the market experienced its busiest quarter of 2019 to date, both in terms of new plans agreed and total property wealth accessed by new and returning customers.

A total of 11,419 new customers opted to release cash from their properties in the third quarter, a 6% increase on the previous quarter, following a detailed process of regulated and qualified financial advice and independent face to face legal advice.

The money unlocked is used for a wide range of purposes, including supplementing pension incomes, providing a ‘living inheritance’ to family, making home improvements or age related adaptations, paying off existing mortgages or other debt and meeting other regular or one off expenses.

So far this year, over 33,000 new customers have chosen to access their property wealth using equity release. This exceeds the total number of new plans agreed in any full year from 1991 to 2016, since consumer safeguards and industry standards were first introduced to the market nearly 30 years ago.

The trend points towards the increasing role of property wealth in retirement planning conversations as research shows that over 50% of home owners aged 45 plus see property wealth as part of their later life plans. This is matched with growing customer participation in the market and an increasing range of flexible products to meet wider consumer needs.

The three busiest quarters recorded for equity release activity have all come in the period between the third quarter of 2018 and the third quarter of 2019. However, average withdrawals have remained stable as the market has grown.

The average first instalment of a drawdown plan was £63,222 in the third quarter of 2019, compared to £64,793 two years ago, while the average lump sum plan was £95,557 compared to £100,389 in the third quarter of 2017.

With retirement incomes required to last an increasingly long time, the Council’s research highlights the important contributing role that property can play in later life financial plans. Bricks and mortar contribute 35 pence in every £1 of household wealth across all age groups, rising to 40p for over 65s and 47 pence among over 75s.

‘As a nation with an ageing population and a growing need to support longer lives, it is important not to overlook property wealth in modern retirement planning conversations. Today’s equity release market is offering new solutions to fund later life, by combining rigorous consumer protections with more product choices and flexibility to help people meet their financial needs and goals,’ said David Burrowes, chairman of the Equity Release Council.

‘The result of buying property and making mortgage payments during their working lives is that bricks and mortar become many people’s single biggest financial asset when they reach later life,’ he pointed out.

‘Industry, regulators and government must continue to promote and encourage lifelong savings habits and support consumers to take a joined-up approach to later life planning. One that takes a holistic view about consumer choices, needs and outcomes and considers all wealth and assets into account,’ he added.