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Retired homeowners use house wealth to clear debts

23 May 2019


Retired homeowners are increasingly using property wealth to clear unsecured debts and mortgages to strengthen their later life finances, new data from the UK’s leading independent equity release adviser Key shows.
 
The number of customers using money from their homes to pay off credit cards and loans hit a three-year high of 35% in Q1 2019 which is 5 percentage points higher than in Q1 2018 (30%).  In addition, 28% used property wealth to clear outstanding mortgages compared with 21% in 2018.
 
Key’s data shows the numbers using property wealth to clear debts in the first three months of the year was the highest since the third quarter of 2016 and the third highest on record since Key started the Market Monitor in 2007.
 
New Lending Rising:
Key’s Q1 2019 Equity Release Market Monitor shows new lending rose to £839.58 million with a further £340.42 million in new potential drawdown facilities also arranged. This takes the value of the market in Q1 2019 to £1.18 billion up from £1.03 billion in the first quarter of 2018 (£777.1 million initial advances and £252.9 future potential borrowing).
 
Plan sales rose 6.6% year on year to 11,190 (Q1 2019) compared with 10,495 in 2018, Northern Ireland, the West Midlands and Yorkshire & The Humber recording the biggest increases as growth spread across the country. 
 
Customers released an average £75,032 during the three months and the most popular use of the money remains paying for home and garden improvements. 60% of people used their equity release for this purpose with many of these  using some or all of the cash to future-proof their home for retirement. Around one in three (31%) chose to pay for holidays while 30% were able to use some or all the cash to help family.
 
Will Hale, CEO at Key, said: “Typically the equity release market has a quieter start to the year but the latest Q1 results suggest that we should see continued growth in 2019.  The current challenging economic environment has seen a move away from holidays and home improvements to people tackling pressing immediate issues such as to pay off debt.
 
“Nearing or entering retirement with an income that might be exceeded or matched by debt repayments can be hugely stressful and may mean people need to make fundamental changes to their plans such as working longer.  However, this will not solve everyone’s issues and is not even viable for some so looking into downsizing, equity release or other later life lending options might be the right answer.  Not only will making sensible choices around property mean that people are less stressed but it will help to set them up for a more comfortable retirement in the future.
 
“Good independent expert advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”
 
Around the country
Key’s Market Monitor, which analyses data reflecting both Equity Release Council members and non-members, found the biggest increase in value released was in the West Midlands where total value rose by 24% with the East Midlands and North East seeing gains of 20%.   Interestingly London (- £7.4 million) and the East Anglia (-£250,000) actually saw modest falls in the amount released as property owners reacted to house price fluctuations by taking lower amounts of equity.
 
The biggest rise in plan sales was in Northern Ireland at 39% with the West Midlands and Yorkshire & The Humber recording 26% gains and the North East seeing a 19% rise.
 
Region Number of plans sold 2019 Q1 Number of plans sold 2018 Q1 Total value of new equity released 2019 Q1 (£ million) Total value of new equity released 2018 Q1 (£ million)
South East 2,742 2,731 £244.495 £230.666
London 1,163 1,156 £141.001 £148.421
South West 1,150 1,144 £88.966 £81.070
West Midlands 991 786 £61.666 £49.734
East Midlands 955 908 £58.993 £48.961
North West 951 904 £56.014 £48.597
East Anglia 854 809 £58.549 £58.799
Yorkshire & The Humber 840 664 £46.290 £35.526
Scotland 615 599 £34.123 £31.558
Wales 540 477 £29.744 £27.323
North East 310 259 £16.259 £13.515
Northern Ireland 80 57 £3.481 £2.924
UK 11,190 10,495 £839.586 £777.100
 
 
Drawdown plans remained the biggest sellers accounting for more than two thirds (68%) of all sales with enhanced drawdown which offers better terms for people with health or lifestyle conditions accounting for 21%. Lump sum lifetime mortgages made up 32% of sales, including 11% of enhanced plans.
 
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