Equity Release Market Growth Slows as Economic Conditions Bite

19 July 2019

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The H1 2019 Market Monitor from the UK’s leading independent equity release advisory firm Key suggests that we have seen a year on year (YOY) increase of 5.6% in the number of plans to 22,126 while total value released edged up by 3% to £1.682 billion.
 

This suggest that while older homeowners released nearly in £9.3 million in property wealth a day in the first six months of the year, the sector is reacting to current economic conditions seen across the property market and growth has slowed.
 

Average loans taken by customers slipped in value by nearly £2,000 to £76,064 compared with the same period a year ago as the market stabilised in the face of continued political and economic uncertainty.
 

Once potential further advances of £706 million on drawdown are taken into account, it suggests that H1 recorded total borrowing of £2.38 billion – driven by new funders entering the market and historically low interest rates.
 

Historic lows in rates

These rates – which start from 3.21% - are also encouraging more customers to remortgage their plans to save money or release additional funds – around 5% customers changed plans in the first half of 2019 compared with 1% in 2018.
 

Up to half of all customers used equity release to repay debt – either in the form of mortgages (20%) or unsecured debt (30%) as people increasingly looked to housing equity to shore up their finances.
 

The biggest single use of property wealth remains home or garden improvements (64%) as older borrowers look to age proof their homes in order to remain in them longer while 28% made gifts to family typically to help with house purchases or weddings.
 

Will Hale, CEO at Key, said: “Against the backdrop of economic uncertainty, the equity release market has seen a subdued first half with slower growth than in recent years.  While the key market drivers of low pension saving and substantial property wealth remain, the over-55s are taking a cautious approach to accessing the value tied up in bricks and mortar at the moment but as confidence returns we do expect the market to pick up.
 

“That said, the market is benefiting from the arrival of new sources of funding which is helping to keep rates at historic lows and to drive the launch of various new products. Consequently, we have seen an increase in the number of customers remortgaging to benefit from lower rates or the opportunity to release additional equity due to house price rises or the higher LTVs that are now available.
 

“The myriad of different reasons that customers use equity release for highlights how vital specialist independent expert advice is to ensure that older homeowners are helped to make the right choices for their individual circumstances.”
 

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 Northern Ireland where total value rose by 26% with Wales seeing gains of nearly 23%.  Regions which recorded slight falls in total value released such as East Anglia, London and the South East all saw an increase in plan sales. Only the East Midlands saw a marginal drop in value released and plan sales.
 

Wales saw the biggest rise in plan sales at 23% with the West Midlands recording an increase of more than 20%. Other areas seeing double digit sales increases included Northern Ireland, the North West, the North East and Yorkshire & The Humber.