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Retired homeowners released more than £3.4 billion of property wealth last year as 2019 ended on a high despite political and economic uncertainty making consumers cautious, data from the UK’s leading over-55s specialist adviser Key shows.
Key’s Equity Release Market Monitor shows total value released dropped by 4% from £3.6 billion while the number of new plans taken out slipped by 3% from 47,081 to 45,598 last year. The last three months of the year saw signs of a return to growth with £921 million released compared with £887 million in the third quarter and a rise in plan sales to 11,820 from 11,722 suggesting a rise in consumer confidence.
Homeowners released nearly £9.5 million of property wealth a day in 2019 but caution among consumers and the dominance of drawdown saw the average amount released slip marginally to £75,631 compared with £76,473 in 2018.
Focus on drawdown
Sales of drawdown plans – which enable customers to manage their property wealth and leave cash to be taken later – accounted for 73% of the market last year compared with 64% in 2018. The total market including unused drawdown facilities was worth £4.9 billion in 2019 compared with £5 billion previously.
In 2019 drawdown accounted for 73% of new business, up by 9% from 64% in 2018. There has been a rise in the number of products on the market, with lenders launching more products which offer drawdown as a feature. As the latest products can offer some of the best rates and in a quest for flexibility, customers are leaning towards the products which have a drawdown feature.
Enhanced drawdown which offers improved terms to customers with health or lifestyle issues accounted for 20% of sales compared with 27% for lifetime mortgages in total (8% of which was enhanced).
Managing debts
Around 29% of equity release customers in 2019 used some or all of the cash to pay off loans or credit cards while 20% used money to clear existing mortgages as they looked to increase their financial resilience in retirement.
The numbers of customers switching from existing equity release plans to take advantage of historically low interest rates also rose to 5% in 2019 compared with 4% in the previous year. With more than 300 products available and ongoing product innovation advisers are likely to continue to see growth in rebroking in 2020.
Home improvements and holidays are still popular:
Around two out of three (64%) of customers used some or all of the cash they released to improve their homes or gardens in 2019. While some customers are undoubtable choosing to install the kitchen of their dreams, anecdotal evidence suggests that more are looking to age proof their homes to enable them to stay in them longer.
Almost a third (32%) were able to fund holidays with some of the money they released and gifting to family continued to be an important motivation for equity release – 28% of customers helped out family from their property wealth in 2019.
Will Hale, CEO at Key, said: “2019 has been a busy year for the sector, there are now more funders than ever before in the market and more than 300 different plans as well as growing consumer interest. That said, we did not see the continued double digit growth that we have seen in recent years as consumers – unsettled by current economic and political events - chose to defer decisions around how housing equity might help them in later life.
“Although we saw small year on year falls in the value and volume of equity release taken out, the last two quarters were more upbeat and we start the year with a positive headwind fuelling the belief that we will continue to see growth in the equity release market. There are more than 24 million over-55s in the UK so market drivers remain strong and as consumer confidence grows we will increasingly see more people looking to take advantage of the innovative new products and continued low rates.
“Indeed, 2020 has the makings of a very interesting year for the equity release market but we need to continue to focus on educating and engaging with key audiences to clearly highlight how housing equity can play a role in meeting the challenges that individuals and the country as a whole face. Boosting retirement income, helping people to pay for social care at home and helping the younger generation onto the property ladder are all positive outcomes delivered by taking a holistic approach to managing your assets in retirement.”
Around the country
Key’s Market Monitor, which analyses data reflecting both Equity Release Council members and non-members, shows strong growth continued in Northern Ireland, the West Midlands and Wales while the North West also saw an increase.
Northern Ireland saw the biggest rise in value released at nearly 17% year on year and in plan sales at more than 9%. Wales saw value released rise by nearly 10% and plans sales by almost 8% while the West Midlands recorded gains in value released of around 11% and plan sales by almost 7%.
| Region | Number of plans sold 2019 | Number of plans sold 2018 | Total value of new equity released 2019 (£ million) | Total value of new equity released 2018 (£ million) |
| South East | 11,018 | 11,777 | £970,735 | £1,047,733 |
| London | 4,730 | 4,850 | £635,799 | £663,715 |
| South West | 4,788 | 5,546 | £364,098 | £420,952 |
| North West | 4,268 | 4,223 | £243,751 | £242,186 |
| West Midlands | 3,875 | 3,627 | £247,150 | £222,771 |
| East Midlands | 3,731 | 4,088 | £225,797 | £244,208 |
| Yorkshire & The Humber | 3,144 | 2,988 | £168,269 | £164,422 |
| East Anglia | 3,413 | 3,446 | £223,207 | £242,062 |
| Scotland | 2,586 | 2,596 | £142,055 | £138,561 |
| Wales | 2,231 | 2,073 | £131,264 | £119,565 |
| North East | 1,347 | 1,438 | £73,769 | £74,789 |
| Northern Ireland | 467 | 427 | £22,727 | £19,452 |
| UK | 45,598 | 47,081 | £3,448,625 | £3,600,422 |