Equity release market improves in H2 but still behind 2019

By Jon Yarker

The UK’s equity release market recovered somewhat in the second half of 2020, but the number of new plans taken out still lags the previous two years.

According to the Equity Release Council’s Spring Market Update, there was a 19% increase in new plans taken out in the second half of 2020 (from 18,420 to 21,917).

However, in total new plans still lagged the previous two years. Over the whole of 2020, 40,337 new equity release plans were purchased.

In comparison, 44,870 and 46,397 new plans were bought in 2019 and 2018 respectively. In total, £3.89bn of property wealth was accessed in 2020, down from £4.2bn in 2019.

Equity release has been increasingly turned to by over-55s with more products now available on the market. According to the ERC’s data, 100 new products were added in the second half of 2020, taking the total number of products available to 488.

Access to retirement interest-only mortgages also improved last year with more than 100 products being made available for the first time.

Commenting on these statistics, Canada Life head of marketing Alice Watson said the impact of Covid-19 on peoples’ finances and retirement plans could be partly responsible to this surge in equity release take-up.

“Property wealth is increasingly being viewed as a component of modern retirement journeys, working alongside existing pension savings, rather than being a question of using either/or,” said Watson. “Whilst releasing equity from a property remains a very significant decision, we know that families across the country are seeing strains on their personal finances, whether that’s from redundancy, rising living costs or caring responsibilities.

“This collective strain is likely to continue being exacerbated by the pandemic and, with the right advice, equity release has proven it can help people to access their property wealth flexibly and safely.”

The pandemic response also impacted mortgage debt repayment trends during the second half of 2020.

Despite total mortgage debt rising, households paid off £33.6bn of existing debt from July to December, including a record £17.6bn in the final quarter of the year – equivalent to £192m a day

Overall, over-55s withdrew 46p of property wealth for every £1 of flexible pension payments in the second half of 2020.

“Advisers are now being provided with a wider range of product features, enabling them to tailor solutions to meet more of their clients’ needs,” added Stephen Lowe, group communications director at Just Group.  “Customers are being very well served by a combination of attractive interest rates and increasing numbers of providers and innovative product options.

“We are confident of the market’s prospects as property continues to be a major part of most people’s financial assets and using housing equity is becoming a cornerstone of their retirement planning.”