Private property wealth passes £6trn milestone

The total value of UK private property passed £6trn for the first time at the end of 2020, as the equity release market recovered from the first coronavirus lockdown.

The latest Spring Market Report published by the Equity Release Council (ERC) revealed that discounting mortgage debt, the amount of UK property equity which is privately owned also reached a record of £4.6trn.

Across the market, the number of equity release products available to consumers rose to record highs last year, with 100 new products added in H2 – meaning a total of 488 products were available by the end of 2020. The ERC also reported that access to retirement interest-only mortgages improved last year, with more than 100 products available for the first time.

During the second half of the year, the volume of new equity release plans taken out climbed 19% compared to the first six months of 2020.

“After the unprecedented upheaval of early 2020, the equity release market showed signs of recovery as households and businesses remained resilient against a challenging backdrop,” ERC chairman, David Burrowes, commented.

“Property wealth ranks second only to pensions in terms of its importance to household finances across the country. The transformation of later life mortgage products in recent years has given people more opportunities to access property wealth at affordable rates.”

Burrowes also stated that accessing property wealth will play “a vital role” in retirement planning, both now and in the years to come.

“For today’s retirees, it can make the difference between making ends meet or enjoying a more comfortable lifestyle by boosting their pension income, improving or adapting their homes life and paying for domestic care support,” he said.

“For younger generations, it can open up the possibility of receiving a ‘living inheritance’ to support their own financial goals, such as getting on the property ladder.”

The ERC’s report also revealed that the average age of new customers remained stable in H2 2020 at 69.9 for new drawdown customers, and 68.3 for new lump sum customers 

Jointly held plans also contributed to a growing share of new lump sum lifetime mortgage activity – at 60% compared with 55% in H1 2019. Average withdrawals of property wealth were largely consistent with previous periods, with drawdown customers reducing extra reserves.

Across the whole of 2020, the report revealed that 72,988 new and returning customers were served, collectively accessing £3.89bn of property wealth to support their finances.

Commenting on the findings, Key CEO, Will Hale, said: “The story around product evolution is important but the bigger picture is the changing nature of demand and the growing acceptance of the central role that property wealth has to play in helping people navigate their way through later life.

“Equity release is increasingly being used to support families and to improve financial flexibility with our own data showing 29% of customers’ refinanced a mortgage while 22% gifted some or all of the money they released.
“Underpinning the growth of the market is specialist advice which is vital to ensure customers look at all their options and arrive at good outcomes.”

more2life CEO, Dave Harris, suggested the report shows the equity release industry is in a “prime position to continue supporting older homeowners” as they navigate their retirement finances.

He added: “Today’s statistics are testament to the work of lenders, advisers, trade bodies and other key players in the market who have been working together to ensure that the individuals who have stood to benefit from equity release have been able to access the financing they need during a difficult period.

“However, as the vaccine roll-out continues apace and lockdown restrictions ease even further, supporting advisers needs to remain a core focus for equity release lenders. This will ensure that this community is well-prepared and equipped to handle customer demand in the coming months.”

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