Equity release mortgages - comment for feature

Journalist: Samantha Downes, Currently at the I (business editing some Sundays (freelance) and Mortgage Solutions

ended 30. April 2022

More than 23,000 equity release customers cashed in property wealth in Q1

  • The number of new and returning equity release customers reached a new quarterly high of 23,395 between January and March this year
  • A total of 150,653 new and existing customers have been active during the pandemic, starting from Q2 2020, compared with 171,586 in the previous two years.
  • Annual growth in the number of new plans agreed recovered to 21% in Q1 from -9% a year earlier
  • Total quarterly lending reached £1.53bn between January and March, up from £1.34bn in Q4 2021
  • The average new loan size grew 6% year-on-year, matching the latest inflation figure¹ and surpassed by the 11% annual UK house price rise which added £27,000 to the average home²

Looking for anecdotal comment around these stats and also the pros and cons of equity release. 

5 responses from the Newspage community

Star Quote
"Equity release has finally arrived. Over the past five years, the industry has worked hard to create products, interest rates and an advice process that is transparent, fair and attractive to homeowners over the age of 55. This has led to the record amount borrowed in the first quarter of 2022. At Ocean Equity Release, we have been inundated with client enquiries over the past six months. From using it to repay residential mortgages at the end of their term to gifting to family members, equity release has become an acceptable option for British pensioners. New innovations such as 'no negative equity guarantee', the ability to pay some or all of the interest, and fixed rate Early Repayment Penalties have moved equity release from the option of last resort to a viable alternative for a growing number of people."
Star Quote
"Equity release in the right circumstances is a worthwhile product, but these figures show that it is relatively easy for customers to raise equity or take further drawdowns, causing some financial risk, particularly to their expectant beneficiaries. It should always be seen as a last resort, and figures like this show that potentially that is not the case. Fortunately, interest rates have been low for a long time, and many of these customers will have rates fixed for life. Where it solves a problem, it's great and I've seen lives changed when used in exactly the right circumstances. Increasing loan sizes are likely a result of hugely increasing property values and don't come as a surprise, but people should be very wary not to unnecessarily over-borrow."
"You can't take it with you, as they say. If your house has jumped up in value by 20% in the past few years and you are scrimping and saving to get by in your retirement, cashing in your chips is very appealing. As the cost of living crisis takes hold, watch these numbers shoot upwards."
"I am not surprised by the growth of this market and it will continue as long as most people's wealth is tied up in a property and UK property prices continue to increase. While I view equity release as a last resort option, it can still provide very good outcomes for clients when done properly. This means that clients, and all family members involved, fully understand the impact of the compounding effects of a loan, and that it should be taken at the right age (over 70 ideally). Usually, there are strong emotional reasons to want to stay in a home and the decisions are not just based on finances. After all, most people have a social network close by that they've built up over 20-30-40 years. It's hard to make new friendships and effectively start over when you are in your 60's and equity release can help in keeping this important part of life a constant whilst providing some funds to maximise the remaining years you have."
Equity release is a booming industry and more borrowers in their later life are using equity release to fund the comfortable retirement they want. This is predicted to increase further with the cost of living crisis weighing heavily on our older generation. Financial Advisors are now starting to consider their clients properties as part of their financial planning toolkit which makes equity release more accessible to all clients not just those with a need for cash but as a sensible financial planning tool. An important message for all existing lifetime mortgage borrowers is you CAN Remortgage! . Borrowers remortgaging their existing lifetime mortgage deal can potentially save thousands of pounds in interest by switching to a new lower interest rate. There are over £300,000 homeowners sitting on high interest rates that as an industry we need to reach out to make them aware of this.