The first half of 2020 saw a 14% drop in customer activity across the equity release market from the same period last year, as well as a 15% drop in new plans agreed, new data from the Equity Release Council (ERC) has revealed.

The ERC’s Autumn Market Report showed that a total 35,501 customers were served between January and June, unlocking a collective £1.76bn of property wealth in total.

These figures were down from 41,263 customers accessing £1.85bn of property wealth during the same period in 2019.

The report also suggested that the second quarter of the year saw consumers limit their withdrawals of both property wealth and pension savings in later life, as the COVID-19 pandemic “prompted caution” while the country went into lockdown.

Property wealth withdrawals via equity release products in the second quarter were the lowest seen since Q1 2017, while the expected spike in flexible pension payments was also absent as activity dipped.

ERC chairman, David Burrowes, said the first six months of 2020 had brought “unprecedented challenges” to households and businesses as the pandemic affected the equity release market.

“Pent-up demand following an uncertain 2019 led to strong customer activity in the first quarter of 2020,” Burrowes said. “However, the impact of COVID-19 and the UK lockdown dominated Q2 when activity fell by a third from Q1, both in terms of lending and new customer numbers, before showing initial signs of recovery in June.

“Throughout this turbulent period, the ERC and its members have sought to maintain market access and protections for consumers who need to draw on the wealth tied up in their homes.

“At the same time, it is more important than ever to remember that releasing equity is a long-term commitment. It is one that calls for careful consideration, supported by personalised advice, to ensure it is appropriate for individual circumstances both now and in the future.”

The ERC’s report also revealed that the average age of new customers using equity release to access their property wealth in H1 2020 was “broadly consistent” with previous periods. The average age of a new drawdown lifetime mortgage customer dipped to 69.8, the first time this was below 70 since H1 2018, while the average age of a new lump sum lifetime mortgage customer increased slightly to 68.5, the highest since H2 2017.

Although product choice was significantly improved from the previous year, up by 88% since the start of 2019, the ERC reported that the market saw a 5% reduction in products available to consumers from 401 to 379 between January and July. The figure was still historically at a high level of choice, the ERC suggested, driven by greater competition and continuing product innovation.

“Not only are rates at historic lows but innovation has arguably never been greater with lenders focusing on making products as flexible as possible,” commented Key CEO, Will Hale.
 
“The fact that equity release rates have fallen further than other borrowing options over a one-year and two-year period highlights how increased competition can benefit older homeowners – particularly at a time when many mainstream lenders are tightening LTVs and lending criteria.

“At the moment, the housing market has remained relatively resilient and over-65s own more than £1.1trn in housing equity which can support their own retirement planning as well as be used to help family.”

more2life CEO, Dave Harris, added: “Today’s figures show that, despite the ongoing crisis, innovation remains high on the agenda for lenders in the equity release market as they look to support older homeowners. Indeed, with average rates falling to record lows and product choice improving significantly, older borrowers have now got more flexibility at their fingertips than ever before when it comes to their financial options.

“It has undoubtedly been a challenging year for the industry, but it’s encouraging to see the positive response from lenders and key industry players to ensure homeowners have had access to the support they need.”

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