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‘RESILIENT’ EQUITY RELEASE MARKET BUILDS CAREFULLY

22 May 2020

Embargoed for 00:01 on Friday, 22 May 2020

‘RESILIENT’ EQUITY RELEASE MARKET BUILDS CAREFULLY

  • Average Amount Released Drops but More People Access their Housing Equity
  • Debt repayment and Gifting Most Common Uses According to New Value Analysis
  • Average residential mortgage repaid using equity release is over £51,000

Key’s Q1 2020 Equity Release Market Monitor shows

Download the full report at: 

www.keyadvice.co.uk/about/market-monitor

In Q1 2020, the number of over-55s accessed the wealth in their property via equity release increased but took out more modest sums than previously shows the new look Market Monitor from Key – the UK’s leading equity release adviser. Compared to this time last year, plan sales rose 6% (from 11,190 to 11,881) while the amount release actually fell by 3.8% (from £839.6 million to £805.2 million).

These changes were in part fuelled by the increase in the sales of drawdown plans (72% in Q1 2020 vs. 66% in Q1 2019) which provide additional flexibility by allowing homeowners to ring fence part of their release for future use. The total of reserved drawdown rose from £349.1 million in Q1 2019 to just over £390 million leaving the market value almost unchanged at £1.2 billion (£1.19 – Q1 2019). 

NEW NEEDS ANALYSIS:

In the new look Market Monitor launched today, Key also unveiled the most in-depth look at how equity release is used by those who access their housing equity – putting to rest supposition that this product is primarily aspirational rather than needs based. Indeed, 37% of all equity released is used to repay debt and 21% is used for gifting with just 8% being spent on holidays and 17% on age proofing customers’ homes or gardens (see table below). 

Volume (i.e. number of people)

Use

Value (i.e. proportion of equity)

23%

Mortgage repayment

25%

29%

Gifting

21%

25%

Unsecure debt repayment

12%

32%

Holidays

8%

63%

Home and Garden

17%

Will Hale, CEO at Key, said: “Following a year of political and economic uncertainty the equity release market started well in 2020 and has proved remarkably resilient given the unprecedented circumstances the UK and the world finds itself in. Consumers are more cautious and while we are finding an increased number of people using equity release, they are taking out less and using more drawdown products to help future proof their later life finances whilst mitigating the impact of roll-up interest.

“Our new analysis of the driving force behind equity release decisions suggest that this is a multi-use product driven often by need rather than aspiration with substantially more of the proceeds being spent on debt repayment and helping family members than holidays. While in an ideal world, everyone would enter retirement debt free, equity release provides those who are not that lucky with real options – supported by a robust specialist advice process that is designed to help people make the right choices for their individual circumstances.”

SPOTLIGHT ON DEBT:

Over a third (37%) of the proceeds of equity release is used to repay debt with mortgages (65%), credit cards (16%) and loans (11%) the most common type of borrowing. Those who choose equity release as an option to either repay an outstanding residential or interest only mortgage repay just over £51,000 while those who settle credit cards (£12,186) and loans (£11,856) using more modest amounts (see appendix I). 

While the different types of debt repaid by each age group depends on their ability to access this type of borrowing, it is interesting to note that there is only £661 difference between the amount over-75s owe on personal loans (£10,549) vs. 55-64s (£11,210) – potentially suggesting that while some people enter retirement without debt, they find that unexpected expenses mean they have to borrow (see table below).

55-64

65-74

75+

Loans

£11,210

£12,773

£10,549

Car Finance

£8,206

£9,111

£15,757

Mortgage

£43,883

£55,933

£47,032

Overdraft

£5,550

£4,432

£5,400

Credit Cards

£11,566

£13,087

£10,439

[See page pages 8 to 13 for more in-depth analysis and commentary around equity release and debt - www.keyadvice.co.uk/about/market-monitor ]

Around the UK

Key’s Market Monitor, which analyses data reflecting the whole market, shows plan sales rose in seven of the 12 UK regions with Northern Ireland at 48% seeing the biggest increase followed by the North West on 31% and the North East on 28%.

Just three of the 12 regions saw increases in the value of new equity released with the biggest rise in Northern Ireland at 68% while London and Scotland saw marginal rises of 3% and 2% respectively. Nearly half of all the property wealth released in the three months came from the South East and London with the South East remaining by far the biggest region for equity release accounting for 30% of all new equity and 25% of new plans.

The table below shows the breakdown across the country:

Region

Number of plans sold 2020 Q1

Number of plans sold 2019 Q1

Total value of new equity released 2020 Q1 (£ million)

Total value of new equity released 2019 Q1 (£ million)

South East

2,964

2,742

£239.366

£244.495

London

1,071

1,163

£145.496

£141.001

South West

1,320

1,150

£87.574

£88.966

West Midlands

1,066

991

£61.055

£61.666

East Midlands

888

955

£47.294

£58.993

North West

1,245

951

£54.797

£56.014

East Anglia

860

854

£55.137

£58.549

Yorkshire & The Humber

880

840

£35.866

£46.290

Scotland

686

615

£34.814

£34.123

Wales

489

540

£22.582

£29.744

North

395

310

£15.371

£16.259

Northern Ireland

117

80

£5.849

£3.481

UK

11,881

11,190

£805,200

£839.586

Anyone looking to release equity from their home can get Key’s independent guide to equity release by calling 0800 531 6027 or visiting https://www.keyadvice.co.uk/equity-release/is-it-right-for-me

ENDS

Appendix I:

Type of Debt

Proportion of Equity Release Proceeds used to Repay Debt by those in Debt

Average Amount

Loans

11%

£11,856

Car Finance

1%

£10,420

Mortgage

65%

£51,409

Overdraft

1%

£5,134

Credit Cards

16%

£12,186

Notes to Editors

* Key market data for 2020 Q1. The Monitor uses Key’s data to reflect the market as a whole. The data reflects both members and non-members of the Equity Release Council, and provides the most detailed analysis of the equity release sector. The figures reflect new customers and the equity they released rather than any ongoing withdrawals via products such as drawdown.

For more information or to request a case study, please contact:

Lee Blackwell

Director of Public Relations and Public Affairs

Key Retirement Group

07384511140

E-mail: [email protected]

Rachel Mann

Key Retirement Group

07384 511269

E-mail: [email protected]

Citigate Dewe Rogerson

Alannah Sims

07984 141186

E-mail: [email protected]

About Key

  • Part of Key Group, Key is the UK’s largest independent equity release adviser – committed to high levels of customer service and the belief that good advice is key to ensuring people make smart sustainable choices around how they use their housing equity.
  • With over 60 industry and consumer awards under their belt, the Key team offer advice on equity release, later life mortgages and retirement interest-only products. The company also provides support with estate planning including wills and lasting power of attorneys.
  • Key is committed to putting customers at the heart of what it does and has a score of 4.9 / 5.0 from over 15,200 scores on the independent review site, Trustpilot.
  • Key is committed to being independent, transparent and straightforward.