Equity release growth

The latest figures from the Equity Release Council (ERC) show that, after several years of consistently steady growth, equity release lending volumes remained similar in 2019 compared to the previous year.

However the ERC points out that this was in the backdrop of a “cautious economic climate.”

Many of us in the industry suspect that the trend will continue upwards as more of us are retiring asset rich but cash poor. With so many of us living longer lives and the value of our homes tending to increase over time, it makes financial sense for many more people to investigate equity release as part of their financial planning.

Awareness of equity release is growing although there does appear to be a gap in understanding of exactly what it is and how it works. See our Myth Buster Blog.

The context

A total of £3.92 billion of housing equity was withdrawn by older homeowners in 2019, down slightly from 2018’s figure of £3.94bn.

The market has seen a four-fold increase over the past decade, with the amount accessed by older homeowners per year growing from £945.97 million in 2009.

Furthermore, more than £1 billion was unlocked in Q4 of 2019, making it the busiest period of the year and one of the busiest quarters on record.

Interestingly, consumer demand continued to grow in 2019, with the total number of customers served reaching a record high of 85,497.

Innovations in Equity Release

According to the Equity Release Council, the introduction of more product features and flexibility, such as the ability to make voluntary or partial repayments with no early repayment charge, has helped to prompt this long-term growth. The ERC report also points out that the average interest rate dropped to a record low of 4.91% in September 2019.

You can read more about some of the reasons people choose equity release here.

David Burrowes, chairman of the Equity Release Council, commented: “After a period of steady growth, the market has reached a point of consolidation in 2019 with lending volumes in line with 2018. The sector enters 2020 in a strong position with updated standards and a greater number of diverse members signed up than ever before. Looking ahead, we’ll continue to work with stakeholders to ensure consumers are able to access the best advice while ensuring joined-up financial planning so that equity release remains a key consideration in mainstream retirement planning.

“Previously viewed as a niche product to support people’s retirement plans, the untapped potential of equity release is now being recognised. This comes as a growing number of customers are recognising the important role property wealth can play in meeting their retirement needs. This has been driven by competition, falling interest rates, increasing numbers of flexible and innovative product options and supported by rigorous standards in the market.”