Unlocked housing wealth increases 8% YOY in Q1

In the first quarter of 2019, £936m of housing wealth was unlocked by owners aged over 55, representing an 8 per cent year-on-year increase, according to the latest figures from the Equity Release Council (ERC).

The council reported that it witnessed its busiest start to any year on record in 2019, with the £936m spread amongst 20,397 customers, including 10,854 who agreed new plans. In comparison, there was £870m of equity released in Q1 2018 by 18,586 customers, with 10,195 new plans agreed.

Across all three measures, the level of activity in Q1 2019 was the highest experienced to date for the first quarter of any year since records began almost 30 years ago. The total number of customers service in Q1 increased by 10 per cent year-on-year, while the total equity released increased by 8 per cent and the number of new plans agreed by 6 per cent.

Since Q1 2015, the equity release market has grown significantly, according to the ERC. The value of housing wealth accessed between January and March has almost trebled over the period, rising by 178 per cent to £936m from £326m. Additionally, the number of new plans agreed has more than doubled, from 4,880 to 10,854 over the years.

The ERC highlighted that Q1’s figures follow in from a “breakthrough” year in 2018, where over 80,000 homeowners aged over 55 collectively accessed £3.94bn of property wealth, including over 46,000 new plans.

Furthermore, between January and March 2019, the average amounts of property wealth being withdrawn by new customers remained steady year-on-year which, according to the council, indicated a stable market. It noted that market expansion is being driven by an increase in customers drawing on their housing wealth, rather than an increase in individual plan sizes.

The average new lump sum lifetime mortgage agreed in Q1 2019 was £97,763, an increase of just 1 per cent from Q1 2018, while new drawdown customers agreed a first instalment of £62,416 on average, reduced by 4 per cent from Q1 2018.

Drawdown lifetime mortgages remained the preferred option for the majority of new customers looking to unlock equity, with 64 per cent opting for this category of product, while 36 per cent chose a lump sum lifetime mortgage. This represented a slight shift in preference compared with Q1 2018, when 32 per cent of new plans agreed were lump sum and 68 per cent were drawdown lifetime mortgages.

Commenting on the data, ERC chairman David Burrowes said: “Demand for equity release is not only growing but broadening, with property wealth being used to meet a growing range of needs in later life. Today’s competitive market is helping thousands of homeowners to make flexible use of their property assets to tackle a host of financial challenges, not just on their own behalf but also on behalf of family members.”

Key CEO Will Hale echoed Burrowes, highlighting that the figures illustrated how “well-established” the growth trend is across the market, with customers taking advantage of the wealth they have accumulated in their home to meet their financial needs.

“Today’s figures support our view that property wealth will play an increasingly central role in retirement planning and also help people to meet later life costs such as care,” he said.

Drawing attention to the flexibility and diversity of equity release products, more 2 life marketing director Stuart Wilson added: “Product innovations such as the flexibility to manage debt, through regular capital or interest repayments and inheritance protection have made these products more attractive to a wider range of older homeowners looking to supplement their income in later life.”

However, he emphasised that the industry must not “rest on its laurels”, warning that it requires more funders and qualified advisers, alongside continued innovation to sustain this level of growth.

Wilson concluded: “Encouraging all older homeowners to at least consider whether housing equity could play a role in their retirement is vital to building a vibrant sustainable market.”

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