The Equity Release Council has revealed that nearly £11 million of property wealth was unlocked by UK homeowners aged 55+ each day from July to September.
Equity release activity rose 8% to £988m in third quarter, the trade body said.
The figures show the market experienced its busiest quarter of 2019 to date, both in terms of new plans agreed and total property wealth accessed by new and returning customers. More than 11,419 new customers opted to release cash from their properties in Q3 2019 – a 6% increase on the previous quarter – following a detailed process of regulated financial and independent legal advice.
The Council said that money unlocked is used for a wide range of purposes, including supplementing pension incomes; providing a ‘living inheritance’ to family; making home improvements or age-related adaptations; paying off existing mortgages or other debt; and meeting other regular or one-off expenses.
So far this year, over 33,000 new customers have chosen to access their property wealth via equity release. This exceeds the total number of new plans agreed in any full year from 1991-2016, since consumer safeguards and industry standards were first introduced to the market nearly 30 years ago.
The Council said this trend points towards the increasing role of property wealth in retirement planning conversations, with growing participation in the market and an increasing range of flexible products to meet wider consumer needs.
The three busiest quarters recorded for equity release activity have all come in the 15-month period between Q3 2018 and Q3 2019. However, average withdrawals have remained stable as the market has grown. The average first instalment of a drawdown plan was £63,222 in Q3 2019, compared to £64,793 two years ago, while the average lump sum plan was £95,557 vs. £100,389 in Q3 2017.
Official demographic projections show that the number of people aged 55+ will increase by nearly 5m or 23% over the next 20 years to make up more than a third of the UK population. Those aged 70 or above – 70 being the average age for taking out a drawdown lifetime mortgage, the most common product choice when unlocking property wealth – will increase from 9m to 13m: a rise of 4m or 44%.
Bricks and mortar contribute 35p in every £1 of household wealth across all age groups, rising to 40p for over-65s and 47p among over-75s.
David Burrowes, chairman of the Equity Release Council, said: “As a nation with an ageing population and a growing need to support longer lives, it is important not to overlook property wealth in modern retirement planning conversations. Today’s equity release market is offering new solutions to fund later life, by combining rigorous consumer protections with more product choices and flexibility to help people meet their financial needs and goals.
“The result of buying property and making mortgage payments during their working lives is that bricks and mortar become many people’s single biggest financial asset when they reach later life. Industry, regulators and government must continue to promote and encourage lifelong savings habits, while also recognising that retirement financial plans are best made by taking all assets into account.”
Alice Watson, head of marketing and communications at Canada Life Home Finance, added: “It’s great to see yet more expansion in the equity release market, with almost £1 billion of property wealth unlocked in the third quarter. This growth is especially positive given the wider political and economic malaise.
“With over 30,000 new customers taking out equity release this year, this is a real vote of confidence in the industry, and a sign that more people are viewing their wealth holistically. We think this is evidence that equity release is becoming an increasingly important tool in mainstream financial planning.
“Further market growth wouldn’t be possible without the kind of innovation that has continued to invigorate the industry, but the most successful products and services will continue to be those that meet customer demand.
“The industry must also ensure that advisers are given enough help and information – previous Canada Life research found that advisers ranked getting more support as the number one thing needed to make equity release more attractive and accessible in 2019. Combining adviser support with further product innovation will be key to fuelling further market growth.”