Equity release plans surge

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

ended 25. May 2022

I'm looking for comment on the following and advice for those considering it.

  • Equity release plan sales surge 21% and value of equity released soars by 30%
  • Record first quarter with more customers using equity release for mortgage repayment than ever before, Key’s 2022 Q1 Equity Release Market Monitor shows

Download the full report at: www.keyadvice.co.uk/about/market-monitor

Older homeowners released an average £111,500 in property wealth in the first three months of the year as the equity release market hit a new high, data from the UK’s leading equity release adviser Key Later Life Finance shows.

Market Boosted by House Price Increases:

Plan sales surged by 21.4% in the first three months of the year to 12,551 compared with last year while the value of new equity released soared by 30.5% to £1.399 billion – the highest on record for the industry.

The strength of the housing market meant the average amount released climbed 7.5% from £103,710 taken out last year and existing equity release customers benefited too. They were able to release another £373 million in further advances or drawdown highlighting how the impact of rising house prices has increased the number of customers using these flexibilities.

The Rise of Remortgaging

Low rates and increasing flexibility of equity release plans is driving an increase in remortgaging – Key estimates 1,789 remortgaging cases were completed in the first quarter which was a 78% increase on last year’s 1,005.

Customers moved an average £121,073 from an interest rate of 5% to 4.1% during the period and the surge in business meant it accounted for 25% of all equity released for debt management.  The rise in flexibility is demonstrated by the number of products available – customers in Q1 2022 could choose from 1,557 plans compared with 518 in the same period last year.

Record Numbers Repayment Mortgages

In Q1 2022, the number of customers (42%) using equity release to repay their mortgages hit an all-time high and is more than double that of ten-years ago (Q1 2021 - 17%) as people seek to manage their outgoings in the face of inflation.  

Indeed, while the financial resilience built up by some during the COVID-19 pandemic has provided some people with a cushion, we have also seen a slight increase in those repaying unsecured debt from 27% (FY 2021) to 29% (Q1 2022).   

Will Hale, CEO at Key, said: “With headlines suggesting that the UK is facing a challenging inflationary environment, we are seeing older customers increasingly choosing to manage their debt using equity release.   Although being able to clear any borrowing before retirement is obviously ideal, with modern equity release products now offering all new customers the opportunity to make penalty-free capital repayments over-55s have more options than ever before.

“It is this type of innovation that serves to meet developing customer needs and has seen Q1 2022 recording record numbers of plans taken out.  Nothing is certain but following a hugely successful Q1, the market in 2022 looks to be in a position to grow and serve more customers than ever before.

“As an industry, we need to continue to rise to the challenge of supporting an ever more diverse universe of clients by building on the evolution that has seen huge growth in the number of products and features available as well as more choice in how customers access specialist advice.”

Spending is Shifting

The number of customers using property wealth to help families fell from 21% last year when the Stamp Duty holiday was still in place to 15% in this quarter, but they still accounted for 19% of all equity released. 

The number using equity release to fund holidays rose to 11% from just 1% last year when COVID-19 restrictions were still in place. The proportion of equity used to pay for holidays only rose to 2% from 1%, however.

Age Differences

Nearly half (45%) of younger equity release customers aged between 55 and 64 used the money to pay off mortgages but their mortgage debt is lower at £63,627 compared with £114,922 for those aged between 65 and 74. Customers aged 75-plus are on average paying off mortgages of £97,681, the data shows.


8 responses from the Newspage community

"This is a worrying trend that shows how many people are ill-prepared for retirement by not seeking out financial advice decades earlier when it would have mattered. With fewer people getting expert pensions and holistic financial advice, making a plan and sticking to it, we are seeing more and more people turn to their only valuable asset; their home. This should be a worry for everyone. These homes were meant to serve as an inheritance for succeeding generations to allow them to get on the property ladder. If that ecosystem begins to break down, we could see a swing where vast swathes of property wealth are siphoned up to large institutional investors, further alienating people and making home-ownership harder for everyone while making a small minority uber-wealthy. We need leadership both from the government and the regulator to show people the issues that arise if people do not save for retirement."
Star Quote
"With a cost of living crisis in full economic flow, it's no surprise that more mortgage borrowers than ever before have decided to release themselves from the financial pressure of mortgage repayments. Once a dirty product shunned by the public, through fear and lack of education, equity release has come on leaps and bounds in recent years, and is now undeniably a core financial planning tool for those aged 55 and over. As our population ages and we enter a new economic cycle, the demand for equity release will only continue to grow."
"We have seen a huge take-up in equity release in the past 18 months. There is a growing understanding among consumers of the improvements that have been made in the market, with plans becoming more and more attractive and lenders offering rates that are more like those offered on traditional mortgages. We have seen over 55's taking equity release for a range of reasons. The most popular reason for people using equity release, in our experience, is to find a way to get out of an interest-only mortgage taken out many years ago. Many people are now unable to refinance their properties due to being on a lower income. You also have people wanting to enjoy their retirements by going on dream holidays, making home improvements or gifting to loved ones to help them purchase their homes. Equity release is a much more attractive proposition these days, with bodies like the Equity Release Council and SOLLA offering advice and making it a much safer option."
"We have seen a huge increase in Equity Release enquires over the past few months. Many of these are from those who have an interest-only mortgage that needs to be repaid and who don't have any money available to do so. Lifetime Mortgages provide a great solution for many borrowers including those who want to gift money to their children, or simply people who want to enjoy the money built up in their home over the years. As ever, always make sure you speak to a specialist to ensure you are getting the best deal and that your best interests are being looked after."
"Equity Release, or Lifetime Mortgages as they are also known, are a very important part of the financial landscape and are the ideal financial solution for many people. Seeing their popularity skyrocket over the years is not a surprise as people use them to repay interest-only mortgages that have come to the end of their term, with no endowment plan or other repayment plan in place to pay off the capital. Others are using equity release to help fund their retirement. They are, however, not the only option open to people; normal mortgages and Retirement Interest-Only (RIO) mortgages are also potentially available and may, in some cases, be a better solution. As always, seek advice from a qualified mortgage professional."
"It's fantastic to see the boom of the equity release market that we have been expecting. I am particularly pleased to see the 78% increase in the remortgage of existing equity release plans, however this continues to be an area that we need to ensure more borrowers are aware of. I still meet clients on a daily basis who are not aware they can remortgage an existing lifetime mortgage onto a lower rate. We are seeing many borrowers in later life with interest-only mortgages coming to an end and facing the scary reality of having to sell their beloved home, or struggling with the rising cost of living. It is now more important than ever that our later life borrowers are aware of the changes to modern equity release, such as ability to pay the interest and capital repayments, no negative equity guarantee and the introduction of The Equity Release Council providing these safeguards which make lifetime mortgages a very viable solution."
My comments on the story: The long awaited boom in the Equity Release industry is finally here! Widely predicted for the last four years, it has arrived due to a combination of factors. The products are now fit for purpose with good interest rates fixed for life, flexibility of interest and even capital repayment, a stronger regulatory framework led by the Equity Release Council and Financial Conduct Authority. It is great to have all these in place, however when consumer demand is not there, the great products were simply not being asked about. The biggest sea change we have noticed in the last 6-9 months is the effect of growing consumer trust of the industry alongside financial necessity driving decisions. Undoubtedly the current ‘cost of living crisis’ is also having an effect as more people are forced to consider options to raise funds that they previously had not. Top tips for anyone seeking advice on their Later Life lending options: Top tips for consumers: 1) Only go to a Broker who can search for Equity Release, Retirement Only Interest Mortgages and Residential Mortgages. An Equity Release broker will only sell you one thing, which may not be right for you 2) Reviews Reviews Reviews. Do not read reviews for the Broker firm you are considering using, read them for the ADVISOR. Big companies have varying quality of advisors. 3) Ask your broker how long they have been advising and how many applications they do per year. Three years advising and thirty cases a year should be a minimum benchmark for an experienced advisor.
"We'll almost certainly continue to see more customers turn to equity release in the months and years ahead. The reported reasoning around low house prices and continued product improvements are valid, but fundamentally there are still a huge number of borrowers out there on interest-only loans with no way or no plan for repaying these. Properly advised equity release advice can be a viable solution to this problem in the right circumstances."