Older homeowners received a £1.94bn property wealth boost in the first half of the year as the equity release market continued its lockdown recovery, data from leading equity release adviser Key shows.
The number of equity release plans taken out rose by 3% in the six months to June 30th to 20,445 compared with a year ago as the total value of new equity released rose by 32% from £1.47bn to £1.94bn. In addition, a further £666m was reserved for future use.
With customers focused on meeting ‘big ticket’ expenses like mortgage and unsecured debt repayment (av. £74,894) and gifting (av. £72,520) rather than holidays (av. £16,458) and home improvements (av, £16,907) the average amount of equity customers are releasing has increased to £94,982 (H1 2021 – £72,340).
However, with a buoyant housing market driving the value of the typical home used for equity release up 15% from £321,209 to £368,883, LTV’s have remained relatively stable (26% from 23% in H1 2020).
The total value of new equity released at £1.94 billion was higher than the £1.68bn released in the first half of 2019 before the onset of Covid-19 as the market returned to growth.
How the money helps customers
More than half of the proceeds of equity release (52%) were used to clear mortgages (45%) and manage unsecured debts (7%) while 23% was used to help family and friends – notably for help with house deposits as buyers rushed to beat the end of the Stamp Duty holiday.
These ‘big ticket’ expenses saw an average of £74,894 in borrowing being repaid and £72,520 being gifted. Over half of people who used their equity to support wider family and friends used it to provide a house deposit (52%) or an early inheritance (59%) – some of which was no doubt also put towards property purchase.
The data revealed an increase in the amount of money used for property purchases – around 7% of the total value released went towards buying homes with the average customer taking out £115,068 to boost their buying power
Will Hale (pictured), CEO at Key, said: “The equity release market is benefiting from the success of the vaccination programme putting the country back on the delayed road to recovery with total value released up strongly and the number of plans taken out increasing.
“Big ticket items like repaying outstanding mortgages, managing unsecured debt and helping family members get their foot on the property ladder is what motivates customers. This is intergenerational fairness in action and equity release customers provided almost £1 million per day in deposits during the stamp duty holiday.
“Drawdown plans remain dominant and with over 710 different products on the market, those who choose equity release to manage their borrowing benefit from more flexibility than ever – including the opportunity to make ongoing interest and fee free capital repayments. That said, customers need to speak to a specialist adviser who can help them make smart sustainable choices around if, when and how to borrow in retirement.”
How plans are used
Around 71% of customers took out drawdown plans in the first half of the year with customers taking an initial average amount of £56,744 and customers reserving another £666.4 million for future use.
During the six months the data shows 14,589 existing customers returned to take out an average £13,765 to support their retirement finances and the number returning to take out further money is expected to continue to grow.
Across the regions
Key’s Market Monitor, which analyses data reflecting the whole market, shows that every region apart from Northern Ireland saw the value of property wealth released increase. London recorded the biggest increase at 74% while Wales recorded a 42.1% rise and another seven regions saw double digit gains.
Wales recorded the biggest rise in plan sales at 24.1% followed by London on 22.6% and a total of seven out of the 12 regions saw increases in plan sales.
The strength of the housing market in the South East and London meant those regions accounted for just over £1 billion of all equity released – more than half the total across the UK during the six months – despite accounting for only 34% of plans sold. The table below shows the breakdown across the country:
| Region | Number of plans – 2021 HI | YOY Change | Value of equity released 2021 H1 (£ million) | YOY Change |
| South East | 4,856 | -0.5% | £561.982 | +29.4% |
| London | 2,160 | +22.6% | £438.906 | +74% |
| South West | 2,412 | +6.5% | £223.089 | +29.7% |
| West Midlands | 1,641 | -7.4% | £113.558 | +7.1% |
| North West | 2,092 | +5.5% | £135.502 | +31% |
| East Midlands | 1,668 | +7.2% | £117.025 | +27.1% |
| East Anglia | 1,185 | -12.8% | £93.516 | +1.3% |
| Yorkshire & The Humber | 1,437 | +1.9% | £82.944 | +12.4% |
| Scotland | 1,096 | -1.5% | £64.505 | +10.3% |
| Wales | 1,075 | +24.1% | £61.908 | +42.1% |
| North East | 718 | +1.2% | £44.356 | +34.4% |
| Northern Ireland | 105 | -45.2% | £4.636 | -49.7% |
| UK | 20,445 | +2.9% | £1,941.932 | +32.1% |
