Equity release market sees busiest start to the year on record

The equity release market in the UK has recorded its busiest start to any year on record in 2019, according to the latest quarterly market figures.

Over the course of the first three months of the year some £936 million of property wealth was unlocked by 20,397 customers, including 10,854 who agreed new plans, the data from the Equity Release Council, the sector’s trade body, shows.

This level of activity was the highest seen to date for the first quarter of any year since records began in 1991. Total customers served in the quarter increased 10% year on year, while the total equity released increased by 8% and the number of new plans agreed by 6%.

Since the first quarter of 2015, the equity release market has grown significantly, with the value of housing wealth accessed between January and March almost trebling, up 187% from £326 million to £936 million. The number of new plans agreed has more than doubled from 4,880 to 10,854, up 122% over the same period.

The first quarter figures follow a breakthrough year in 2018 where over 80,000 home owners aged 55 plus in total collectively accessed £3.94 billion of property wealth, including over 46,000 new plans agreed.

The fourth quarter of 2018 remains the busiest quarter on record for equity release activity, with the first quarter of 2019 picking up from a slightly lower level, mirroring the typical seasonal pattern seen around the turn of the year for much of the last decade.

From January to March 2019, the average amounts of property wealth being withdrawn by new customers remained steady year on year. The council says that this indicates a stable market with expansion being driven by an increase in customers drawing on their housing wealth, rather than an increase in individual plan sizes.

The average new lump sum lifetime mortgage agreed in the first quarter of2019 was £97,763, an increase of just 1% from the first quarter of 2018, while new drawdown customers agreed a first instalment of £62,416 on average, reduced by 4% from the first three months of 2018

Drawdown lifetime mortgages remained the preferred option for the majority of new customers looking to unlock equity, with 64% opting for this category of product while 36% chose a lump sum lifetime mortgage. This represented a slight shift in preference compared with the first quarter of 2018, when 32% of new plans agreed were lump sum and 68% were drawdown lifetime mortgages.

Appetite for exploring equity release is being driven by a range of consumer needs across the age range of customers, highlighting the broadening social benefits of accessing property wealth among the UK’s older home owners.

When asked for their views on the biggest current drivers of equity release market activity, Equity Release Council members identified funding home improvements, supplementing retirement income and helping family and friends with their own house moves among the key motives for customers aged 65 to 74, which is the average age range for agreeing new plans.

These factors were also identified for customers aged 75 plus, with the ability to fund later life care needs such as home adaptations and domiciliary care also seen as a key motive for this group to access housing wealth via equity release.

Among the 55 to 64 age group, paying off existing mortgages and unsecured debts as well as funding home improvements were commonly seen by members as key drivers of activity.

‘Demand for equity release is not only growing but broadening, with property wealth being used to meet a growing range of needs in later life. Today’s competitive market is helping thousands of home owners to make flexible use of their property assets to tackle a host of financial challenges, not just on their own behalf but also on behalf of family members,’ said David Burrowes, chairman of the Equity Release Council.

‘Customers now have access to hundreds of product options combining various features to suit different individual circumstances, all underpinned by product safeguards, such as the guaranteed right to remain in their homes with no risk of repossession for missing repayments,’ he pointed out.