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‘Resilient' equity release market builds carefully

22 May 2020

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 and also took out slightly higher 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 2.7% (from 11,190 to 11,495) while the amount release actually fell by 3.8% (from £839.6 million to £949.8 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 £377 million leaving the market value slightly higher at £1.3billion (£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 98% seeing the biggest increase followed by London on 22% and the South West on 16%.
 
Ninw of the 12 regions saw increases in the value of new equity released with the biggest rise in Northern Ireland at 43%% while the North West saw a 27% increase and the North East saw a 23%. 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 2,868 2,742 £282.372 £244.495
London 1,036 1,163 £171.636 £141.001
South West 1,277 1,150 £103.307 £88.966
West Midlands 1,032 991 £72.024 £61.666
East Midlands 859 955 £55.791 £58.993
North West 1,205 951 £64.642 £56.014
East Anglia 832 854 £65.043 £58.549
Yorkshire & The Humber 755 840 £42.310 £46.290
Scotland 664 615 £41.068 £34.123
Wales 473 540 £26.638 £29.744
North East 382 310 £18.132 £16.259
Northern Ireland 114 80 £6.899 £3.481
UK 11.495 11,190 £949.868 £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

Page last updated: Monday 27 July 2020