Interest-only helps drive equity release record
10 May 2017
- One in five customers are paying off mortgages as lump sum plan sales surge to 41% of the market
- Pensioners cash in £7 million a day of property wealth to boost retirement planning
- Key Retirement Equity Release Market Monitor shows record growth for plan sales and value released
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Interest-only mortgage borrowers are contributing to the expanding equity release market as property wealth pays out £7 million a day to pensioners, according to new analysis from leading over-55s finance specialist Key Retirement.
More than one in five (22%) customers used property wealth to clear mortgage debt in the first three months of the year, with lump sum plan sales climbing to more than two-fifths of the whole market, Key’s Q1 Equity Release Market Monitor shows.
Mortgage repayment is expected to increase, with around 10,000 borrowers a year between now and 2020 coming to the end of interest-only loans.
Key’s data, which follows the Equity Release Council’s recent record first quarter figures, provides deeper insights into market trends and highlights how the growth in lump sum plan sales underlines the demand from customers using the maximum amount available.
Customers are on average releasing £73,610 of property wealth and as much as £117,000 in London. The average house price for equity release increased to £322,400 – around 50% higher than the average UK house price of £217,502** - and was nearly £600,000 in London.
Plan sales rose by 88% in the South East of England and by 75% in the East Midlands against 58% for the UK as a whole, while the value released grew by 89% in the East Midlands and by 78% in the South East compared with nearly 53% for the UK as a whole.
Key’s data shows £633 million of property wealth was released in the first three months of the year compared with £414 million for the same period last year, with a total of 8,604 plans sold compared with 5,447 in Q1 2016.
Most of the wealth is being used to fund home and garden improvements with 62% of customers releasing money to enhance their homes, and with nearly a third (32%) using the cash to fund holidays. However, 30% are clearing credit card and loan debt.
Dean Mirfin, technical director at Key Retirement, said: “The pace of growth in the equity release market is accelerating rapidly and the year-on-year expansion this quarter underlines how property wealth is contributing to financial planning.
“Equity release customers are able to tackle a wide range of issues and the increasing popularity of lump sum plans underlines how record low rates for plans are providing vital support for retirement planning.
“With more than 1 in 5 releasing equity from their homes to repay mortgages as the first major wave of interest only mortgage maturities hits, it is certain that demand from people facing capital repayment deadlines will look to equity release as a solution.
“That makes it even more important for mortgage lenders to start engaging with equity release as a potential solution for their customers. Many are, but unfortunately not enough.”
Across the country all 12 regions saw growth in the number of plans sold, and only Scotland saw a marginal drop in the total property wealth released. More than half of the total property wealth released was in the South East and London, while the South West saw the second highest number of plans sold in the quarter.
| Region | Number of plans sold Q1 2017 | Number of plans sold Q1 2016 | Total value released Q1 2017 (£ million) | Total value released Q1 2016 (£ million) |
| South East | 2,431 | 1,291 | £204,422,236 | £114,573,285 |
| South West | 1,044 | 654 | £80,350,398 | £49,902,911 |
| London | 941 | 657 | £110,169,103 | £87,521,936 |
| North West | 691 | 518 | £38,872,371 | £29,764,729 |
| East Midlands | 681 | 390 | £39,950,089 | £21,152,450 |
| East Anglia | 592 | 376 | £38,120,793 | £25,127,067 |
| Yorkshire & Humberside | 560 | 376 | £30,356,684 | £20,363,748 |
| West Midlands | 517 | 379 | £34,931,047 | £21,497,001 |
| Scotland | 510 | 365 | £21,598,786 | £21,298,844 |
| Wales | 371 | 250 | £19,905,843 | £12,885,489 |
| North East | 207 | 146 | £11,089,145 | £8,252,952 |
| Northern Ireland | 61 | 45 | £3,538,882 | £2,291,168 |
| UK | 8,604 | 5,447 | £633,305,377 | £414,631,579 |
Around 58% of all sales were drawdown plans, including enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions, compared with 41% from lump sum single advance lifetime mortgages including enhanced products.
Anyone looking to release equity from their home can get Key’s independent guide to equity release by calling 0800 531 6027 or visiting www.keyadvice.co.uk/equity-release/request-a-free-guide
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Notes to Editors
* Key market data for Q1 2017. The Monitor uses Key’s data to reflect the market as a whole. The data reflects both members and non-members of the Equity Release Council, and provides the most detailed analysis of the equity release sector
** http://landregistry.data.gov.uk/app/ukhpi
For more information, please contact:
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Key
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About Key
Founded in 1998 Key is the leading specialist provider of financial solutions to the over 55’s. Key ’s head office is located at Key, Baines House, Midgery Court, Pittman Way, Fulwood, Preston PR2 9ZH.