Home equity release market expanded at a record rate in the UK in 2017

Retired home owners cashed in more than £3 billion of property wealth last year as the equity release market expanded at a record rate, a new analysis shows.

Homes paid out more than £8.2 million a day last year to pensioners with the average retired home owner using £77,380 of property wealth to boost their standard of living, according to the research from over 55s finance specialist Key Retirement.

The total value of property wealth released in 2017 grew 40% on the previous year to £3.014 billion, the fastest rate of growth on record and the sixth increase in a row taking it to more than double its size in 2014, the report also shows.

More than 100 retired home owners tapped into their property wealth to enhance their retirement finances every day last year as plan sales increased by 41% to 38,955 from 27,666 in 2016.

Home owners unlocked an average £77,380 tax free each by using equity release highlighting the importance of property wealth in retirement planning.

The most popular use of the cash was to fund home and garden improvements with 64% re-investing some or all of their money in their houses. Some 33% were taking more holidays while 24% helped family and friends.

However, many used the money to clear debts with 22% paying off existing mortgages including interest only capital repayments and 31% clearing credit cards and loans.

Londoners cashed in the most taking an average £133,700 compared with nearly £49,000 in Scotland while around 27% of all plan sales were in the South East of England which accounted for nearly a third of the property wealth released during the year.

‘Expansion in the market is being driven by customer demand as retired home owners’ confidence in making full use of their property wealth continues to grow. 2017 saw a series of records broken but perhaps most significant is the pace of expansion last year with around 40% growth in plan sales and the total value released at an all-time high,’ said Dean Mirfin, chief product officer at Key Retirement.

‘More lenders are launching in the market in response to demand and that in turn is increasing competition, driving down rates and bringing new innovative features to the market as expert advisers increasingly recognise how property wealth makes a major difference for retirement income,’ he added.

Across the country all 12 regions saw growth in the value of property wealth released and the number of plans sold with the East Midlands recording the biggest increase in property wealth released and the South West seeing the biggest rise in plan sales.

The total value of property wealth released soared by 60% in the East Midlands and plan sales surged by 50% in the South West. Hot spots for lending growth included the South West at 55% and Northern Ireland at 51% while strong areas for plan sales included the North East at 48% and East Anglia on 47%. Every part of the country saw plan sales increase by 30% or more while the lowest rise in total wealth released was 16% in Scotland, but against a 30% increase in new plan numbers.

Around 62% of all sales were drawdown plans, including 17% enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions, compared with 38% from lump sum single advance lifetime mortgages which includes 18% of enhanced products.