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Pensioners release £2.1 billion of property wealth

11 January 2017

  • Equity release market hits new all-time high in 2016 after fifth year of growth
  • Retired homeowners cash in average £78,000 from their homes, www.keyadvice.co.uk’s 2016 Equity Release Market Monitor shows
 
Download the full report at: 
www.keyadvice.co.uk/about/market-monitor
 
Retired homeowners withdrew more than £2.1 billion of property wealth last year as
the equity release market surged to a new all-time high after its fifth year of growth, according to new analysis from leading over-55s finance specialist www.keyadvice.co.uk
 
Homes paid out more than £5.8 million a day last year to pensioners with the average retired homeowner accessing nearly £78,000 from their property to boost their standard of living.
 
The total value of property wealth released in 2016 grew 26% on the previous year to £2.154 billion – the fifth increase in the equity release sector in a row taking it to more than double its size in 2011, Key’s 2016 Equity Release Market Monitor shows.
 
The number of homeowners using property wealth to enhance their retirement finances rose by 17% to around 27,666 compared with 23,747 in 2015.
 
Homeowners gained an average £77,877 each by using equity release, underlining the confidence in using property wealth for retirement planning. Key’s research shows around two-thirds (63%) of customers are using some or all of the cash released for home and garden improvements.
 
However around a third (31%) are spending some of their property wealth on clearing loans or credit card debts, narrowly ahead of the 29% who use the money to fund holidays with 24% who are helping out family.
 
Mortgage repayment, which is expected to increase throughout 2017 and beyond due to the pressures of interest only maturities, accounted for 22% of customers’ use for funds released.
 
Detailed findings show wide variations in the amounts released around the country with Londoners cashing in around £143,000 compared with £49,656 in Northern Ireland, Key’s Equity Release Market Monitor, which analyses data for Equity Release Council members and non-members shows. More than half the value of property wealth released was in London and the South East, where around 10,500 homeowners shared £1.1 billion.
 
Dean Mirfin, technical director at Key (www.keyadvice.com), said:  
“The equity release market has broken through the £2 billion barrier for the first time and has more than doubled in value in just five years, highlighting how property wealth is making a huge contribution to retirement planning.
 
“The average amount being released by retired homeowners at nearly £78,000 underlines that property wealth can help with a number of issues for customers, ranging from improving their homes and going on holiday to helping family and clearing debt.
 
“With more than 1 in 5 releasing equity from their homes are repaying mortgages and with 2017 being the start of the first major wave of interest only mortgage maturities we expect demand from those with a shortfall to repay the capital, or no means at all, to turn to equity release as a solution which will further drive demand.
 
“Rate cuts across the market and the launch of new solutions demonstrates that the market is responding to the growing need for alternatives to traditional retirement income solutions which are being squeezed by historically low interest rates.”
  
Across the country seven out of 12 regions saw growth in the value of property wealth released with East Anglia recording the biggest increase at 67%, followed by a 43% rise in London, while the South East saw growth of 35% and Wales growth of 32%. The biggest fall in property wealth being released was 29% in Northern Ireland while the North West and Yorkshire & Humberside were only slightly lower.
 
East Anglia also recorded the highest increase in total plan sales at 47% followed by Wales on 37%. The East Midlands saw a 29% increase in plan sales during 2016.
 
Region Number of plans sold 2016 Number of plans sold 2015 Total value released 2016 (£ million) Total value released 2015  (£ million)
South East 7,451 5,938 £670,400,133 £496,039,774
London 3,081 2,412 £440,521,081 £308,323,135
South West 3,268 2,787 £240,538,562 £198,757,026
North West 2,323 2,399 £128,788,605 £130,316,638
East Anglia 2,004 1,360 £144,225,020 £86,344,969
East Midlands 2,201 1,704 £121,583,919 £95,084,320
West Midlands 2,007 1,634 £118,556,544 £94,979,236
Scotland 1,568 1,854 £86,584,205 £101,026,421
Yorkshire & Humberside 1,628 1,724 £88,528,759 £92,049,565
Wales 1,212 885 £66,636,650 £50,421,433
North East 723 792 £38,210,200 £44,172,304
Northern Ireland 200 257 £9,949,180 £14,082,239
UK 27,666 23,747 £2,154,522,866 £1,711,597,148
 
 
Around 62% of all sales were drawdown plans, including enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions, compared with 38% from lump sum single advance lifetime mortgages including enhanced products.
 
Anyone looking to release equity from their home can get Key’s independent guide to equity release by calling 0800 531 6027 or visiting www.keyadvice.co.uk/equity-release/request-a-free-guide