The Equity Release Council has revealed that £1.06bn of property wealth was accessed via equity release products in the first quarter of 2020, up by 14% from £936m a year earlier.
This was driven by the return of consumer confidence in the early months of 2020, following an uncertain 2019, before the onset of coronavirus and UK lockdown measures.
Equity release continues to attract attention from consumers as a mainstream financial product for later life, with a 2% increase in new plans agreed by homeowners aged 55+ to 11,079 in Q1 2020 – the largest total for any Q1 period since records began in 1991.
The Council said that property wealth typically used for a range of purposes include providing additional retirement income, funding one-off expenses and lifestyle purchases, meeting homecare costs and gifting a ‘living inheritance’ to family or friends.
David Burrowes, chairman of the Equity Release Council, said: “These figures reflect the return of consumer confidence to the broader UK economy at the start of the year, after December’s election promised to restore certainty before coronavirus took hold.
“Pent-up demand from 2019 meant homeowners continued to look to property wealth in growing numbers for later life finance in January and February, backed by strong consumer protections and increasing product flexibility.
“As the nation has since adjusted to life under lockdown, the market has adapted to find solutions for the safe provision of advice and valuations, enabling customers to chose the option of equity release while respecting social distancing guidelines.
“Equity release is a carefully considered choice made by weighing up both short and long-term needs through a detailed financial and legal advice process.
“Beyond the current uncertainty, property wealth will continue to play an important role as part of a multi-asset approach to meet financial needs in later life.”
Drawdown lifetime mortgages remained the most popular type of new plan agreed, albeit with a lower share (57%) than a year earlier (64%) as the number of new drawdown plans totalled 6,267.
The average size of the first instalment of new drawdown plans rose 2% from Q4 2019 to reach £68,492, with a further £39,214 reserved for future use.
Returning drawdown customers continued to grow in number, as a result of more people having taken out these products in recent years – allowing them to access property wealth in stages from an agreed pot and limit interest costs.
Lump sum lifetime mortgages made up 43% of new plans arranged in Q1 2020, up from 36% in Q1 2019, with 4,811 new plans taken out in total.
Appetite for home reversion plans remained low as they continue to make up below 1% of new plans agreed.
Dave Harris, CEO of More 2 Life, added: “Today’s figures reveal the equity release market started 2020 with signs of strong growth. The number of older homeowners using equity release was up 7% on the same period in 2019, and over £1bn of property wealth was unlocked by over-55s during the quarter.
“However, as we start to move through Q2, the landscape has become drastically different. The coronavirus pandemic has seen the average equity release customer self-isolating and the industry considering how it can maintain safeguards while still supporting those who need equity release.
“Continued collaboration amongst funders, lenders and trade bodies to ensure that the solutions customers need during these uncertain and challenging times are available is needed. It will also be crucial for the wider industry to help equip advisers with more tools, support and ‘know how’ to ensure that they can continue offering the highest-quality service to these customers.
“There is no doubt in my mind that equity release will play a vital role in supporting many people finances now and in the future but this can only happen if we learn from the challenges we are facing now.”