Equity release market soars to £3.6bn

The latest figures release by independent equity release adviser, Key, have shown that the market has doubled in size in just three years.

Related topics:  Finance
Warren Lewis
17th January 2019
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Key revealed that during 2018 retired homeowners released £3.6 billion in new property wealth last year - equating to nearly £10 million a day with customers releasing an average £76,500 to improve their standard of living.

The number of customers using money to help families rose to 27% from 24% the previous year highlighting how property wealth is increasingly supporting a wider range of financial needs for retired people. Money gifted to family and friends is typically being used to clear debts, pay for significant life events such as weddings or to fund house deposits. Key’s figures show other major uses of gifts are to pay for large family holidays, fund university fees or buy cars.

The most popular use remains funding home and garden improvements with 64% re-investing some or all the money in their houses – often to “age-proof” the property. Around one in three (33%) paid for holidays and 31% used some or all the cash to clear credit cards or loans while 22% paid off existing mortgages.

All areas of the country recorded strong growth in plan sales and value released with Londoners receiving the biggest cash boost at £136,850. Total value released in the South East during the year exceeded £1 billion for the first time [see table below].

Drawdown plans remained the biggest sellers accounting for around two thirds (64%) of all sales, including 15% in enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions. In 2018, customers reserved £1.46 in funds using these products. Lump sum lifetime mortgages made up 36% of sales, including 13% of enhanced plans.

Will Hale, CEO at Key, said: “The equity release market recorded another strong year of growth in new lending taking it to £3.6 billion and has doubled in size in three years demonstrating how important it is to retirement planning. Once further advances and additional drawdown is included it is getting close to £4 billion.

The growth in gifting highlights the intergenerational benefits of equity release for families with money being used to clear debts, fund university fees and pay for house deposits and weddings. Even the use of equity release to fund home and garden improvements has benefits for families as it helps people to ‘age-proof’ their home and preserve wealth for the family.

Debt remains however a major issue for some retired people and substantial numbers are relying on equity release to clear credit cards and loans as well as paying off mortgages. Good specialist advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”

Around the country

Key’s Equity Release Market Monitor, which analyses its data reflecting both Equity Release Council members and non-members, found the biggest increase in value released was in Scotland where total value rose by nearly 38%. The West Midlands, Yorkshire & Humberside and Wales all recorded major gains.

Northern Ireland saw the biggest increase in plan sales with a 47% rise during the year while the North East, West Midlands and Yorkshire & Humberside all saw strong increases year-on-year.

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