Equity release market grows 41% in Q3

There were 10,351 new equity release plans agreed during the third quarter, reflecting an increase of 41% as national lockdown conditions were eased, according to new data published by the Equity Release Council (ERC).

However, the figure remained remained 9% down year-on-year from 11,419 in Q3 2019 and represented the second slowest quarter, after Q2 2020, since Q1 2018.

The new data revealed a gradual increase in new customer activity during the quarter, with July seeing 3,147 new plans agreed, followed by 3,228 in August and 3,976 in September. 

Another 6,697 customers returned during Q3 to take extra drawdowns from their agreed reserves – a level up 19% from 5,608 in the previous quarter, but still 30% below the 9,605 seen this time last year. 

In total, the ERC revealed that £963m of property wealth was unlocked during Q3 by new or returning customers. This figure was up by 38% from Q2, but down 3% from Q3 2019.

“These figures show a steady return to something closer to normal activity over the summer, after the market weathered the initial impact of COVID-19,” said ERC chairman, David Burrowes. “With the country experiencing a break from lockdown, the pick-up was helped by a mix of new enquiries and delayed cases from earlier in the year.

“Equity release is a carefully considered choice, and this year’s unprecedented events make it more important than ever for people to weigh up their decisions through regulated financial advice, independent legal advice and conversations with those closest to them.

“Despite the uncertain climate, the market has adjusted well to the challenges of operating safely in a pandemic. Desktop property valuations have been used selectively, solicitors have taken extra steps to maintain consumer protections when advising remotely, and product pricing has remained competitive.

“Looking ahead, the key market drivers remain in place: people are living longer and retirement finances are increasingly squeezed as generous final salary pensions edge further to extinction. Many older households are already facing a situation where their expenses outweigh their disposable income, which makes access to property wealth an important pillar to support later life living standards.”

The ERC suggested the climb back towards pre-pandemic levels of activity was influenced by an extended pipeline and delayed cases from earlier in the year. New plans agreed in the six months from April to September remained 20% below the same period in 2019.

Commenting on the new figures, more2life CEO, Dave Harris, suggested the hard work of key players in the equity release market over the past quarter has gone a long way in “stimulating activity post-lockdown”.

“The sector has adapted to the challenges of the past six months and is in a strong position to continue serving older borrowers including those who may find themselves impacted by the crisis,” he said.
“While all choices around housing equity need to be made taking into account both a client’s long-term and short-term needs, it is crucial that people realise that they can use their housing equity at the moment if they need to.

“Adviser support will be key here, and it will be up to lenders to ensure that engagement and education for the intermediary community is at the top of the agenda so that they are able to help older clients with some of the more difficult financial choices they may need to make.”

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