The Equity Release Council has reported that the first quarter of 2019 was the busiest start to any year on record for the equity release market.
Over the course of Q1, £936m of property wealth was unlocked by 20,397 customers, including 10,854 who agreed new plans.
Across all three measures, this level of activity was the highest seen to date for the first quarter of any year since records began in 1991. Total customers served in Q1 2019 increased 10% year-on-year, while the total equity released increased by 8% and the number of new plans agreed by 6%.
Since Q1 2015, the equity release market has grown significantly, with the value of housing wealth accessed between January and March almost trebling (+187%) from £326m to £936m. The number of new plans agreed has more than doubled from 4,880 to 10,854 (+122%) over the same period.
The Q1 figures follow a breakthrough year in 2018 where over 80,000 homeowners aged 55+ in total collectively accessed £3.94bn of property wealth, including over 46,000 new plans agreed. Q4 2018 remains the busiest quarter on record for equity release activity, with Q1 2019 picking up from a slightly lower level – mirroring the typical seasonal pattern seen around the turn of the year for much of the last decade.
From January to March 2019, the average amounts of property wealth being withdrawn by new customers remained steady year-on-year. This indicates a stable market with expansion being driven by an increase in customers drawing on their housing wealth, rather than an increase in individual plan sizes.
The average new lump sum lifetime mortgage agreed in Q1 2019 was £97,763, an increase of just 1% from Q1 2018, while new drawdown customers agreed a first instalment of £62,416 on average, reduced by 4% from Q1 2018.
Drawdown lifetime mortgages remained the preferred option for the majority of new customers looking to unlock equity, with 64% opting for this category of product while 36% chose a lump sum lifetime mortgage. This represented a slight shift in preference compared with Q1 2018, when 32% of new plans agreed were lump sum and 68% were drawdown lifetime mortgages.
Appetite for exploring equity release is being driven by a range of consumer needs across the age range of customers, highlighting the broadening social benefits of accessing property wealth among the UK’s older homeowners.
When asked for their views on the biggest current drivers of equity release market activity, Equity Release Council members identified funding home improvements, supplementing retirement income and helping family and friends with their own house moves among the key motives for customers aged 65 to 74, which is the average age range for agreeing new plans.
These factors were also identified for customers aged 75+, with the ability to fund later life care needs such as home adaptations and domiciliary care also seen as a key motive for this group to access housing wealth via equity release.
Among the 55 to 64 age group, paying off existing mortgages and unsecured debts as well as funding home improvements were commonly seen by members as key drivers of activity.
David Burrowes, chairman of the Equity Release Council, added: “Demand for equity release is not only growing but broadening, with property wealth being used to meet a growing range of needs in later life. Today’s competitive market is helping thousands of homeowners to make flexible use of their property assets to tackle a host of financial challenges, not just on their own behalf but also on behalf of family members.
“Customers now have access to hundreds of product options combining various features to suit different individual circumstances – all underpinned by product safeguards, such as the guaranteed right to remain in their homes with no risk of repossession for missing repayments.
“The recent addition of regular income-paying products has added to a varied product range offering monthly interest payments, ad-hoc lump sum repayments, downsizing protection and inheritance guarantees. As a result, housing wealth is playing an increasing role in supporting the nation’s later life finances, underpinned by regulated financial advice and independent legal advice to assess where or not equity release is a suitable fit for individual circumstances.”
Alice Watson, head of marketing and communications at Canada Life Home Finance, said: “It’s a very welcome sign that equity release continues to scale new heights, with the sector registering record first quarter lending for the sixth year in a row. However, the amount lent in Q1 2019 is only 8% higher than for the same period last year, a much lower rate of growth compared with the high double-digit increases we’ve seen in more recent quarters. This is a timely reminder that the industry shouldn’t rest on its laurels.
“There is still plenty of work to be done to demystify equity release for homeowners and overcome common misconceptions, as well as to continue product innovation to meet customers changing needs. And as our research published at the beginning of the year found, advisers are looking to the sector to help more advisers get qualified to offer the product – this was the number one factor identified by the sector as important in making equity release more attractive in 2019.
“Providers have a key role to play in making sure advisers have access to the education and support they are asking for. Meeting advisers’ needs gives them additional tools to meet customers’ needs – which is key to ensuring the market continues to succeed.”