Older homeowners release £111,500 in property wealth

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.

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 £1.399bn – 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 m 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, Key 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.

Across the regions

Key’s Market Monitor, which analyses data reflecting the whole market, shows plan sales and the total value of new equity released rose in every region apart from in London where plan sales were marginally lower. However, the total value of new equity released still rose by 17% in London.

The biggest year on year rise in the total value of new equity released was in Northern Ireland where the increase was 248.7% followed by Yorkshire & The Humber on 66% and Scotland on nearly 64%.

Northern Ireland also recorded the biggest year-on-year rise in plan sales at 151.1% followed by Yorkshire & The Humber on 51% and Scotland on 46%. The East Midlands on nearly 37% and the North East on 35% also recorded major increases.

The strength of the housing market in the South East and London meant those regions accounted for 45% of all equity released during the three months despite accounting for 31% of plans sold.

More plans were sold in the South West, North West, East Midlands, and West Midlands than in London with Yorkshire & The Humber only slightly behind the capital.

The table below shows the breakdown across the country:

RegionNumber of plans sold Q1 2022% change on Q1 2021Total value of new equity released Q1 2022 (£ million)% change on Q1 2021 (£ million)
South East2,872Up 13.2%£391.448Up 14.6%
London1,006Down 0.6%£234.476Up 17%
South West1,480Up 17.1%£184.579Up 51.8%
North West1,211Up 16.1%£96.372Up 26.1%
East Midlands1,105Up 36.9%£86.516Up 34.7%
West Midlands1,047Up 26.4%£100.076Up 55.1%
East Anglia754Up 15.2%£76.771Up 36.8%
Yorkshire & The Humber1,000Up 51.4%£71.635Up 66.2%
Wales713Up 17.4%£59.722Up 48.5%
Scotland819Up 46%£64.314Up 63.8%
North East439Up 35%£26.138Up 15.3%
Northern Ireland105Up 151.1%£7.466Up 248.7%
UK12,551Up 21.4%£1.399Up 30.5%

Reaction

Stuart Wilson, chief executive officer at Air Group:

“Today’s data demonstrates just how strongly the equity release sector has bounced back from the blows it was dealt during the coronavirus pandemic. In the three months to the end of March 2022, more than 12,500 new plans contributed to £1.4 billion in lending, making it the largest first quarter on record.

“Interestingly, we’ve also seen a significant increase in the number of customers choosing to remortgage their plans to access additional borrowing as house prices increase or to secure better rates and features. While rates are increasing, they are still modest when compared to historic levels so customers looking for a better deal are likely to remain a feature in the market for the foreseeable future.

“Behind these figures sits the hard work of the advisers who have worked consistently to ensure that their customers find the right option for their individual circumstances – when they take the products out and as they live with them. AIR will continue to focus on supporting this demographic with increased tools, functionality and insights.”

Kay Westgarth, head of sales, Standard Life Home Finance:

“While younger age groups may be watching the recent significant house price inflation with frustration, over-55s have released £1.8bbn worth of housing equity in Q1 which has been used to support themselves and their wider families. 

“With over-55s – especially those on fixed incomes – becoming increasingly aware of the impact of inflation, the focus has been on financial resilience and increasing disposable income.  Just under a third using the equity released to repay unsecured debts, while 42% have used it to pay off outstanding mortgages.

“However, it’s not just the cost-of-living crisis which is spurring on homeowners to unlock the equity in their home but also the desire to catch up on time with family and friends lost due to the pandemic. 

“In Q1 2022, one in ten clients (11%) chose to use some of their housing equity for travel which is a significant increase from Q1 2021 (1%), while 36% of customers used the equity unlocked to fund home and garden improvements

“Though many customers are using housing equity to ward off the cost-of-living crunch, it’s important to avoid generalisations, and remember that having the opportunity to use some of the proceeds for discretionary spending and family is a focus for many.  Product innovation will be key to ensuring the needs of all retirees are met.”

Dave Harris, CEO, more2life: 

“While there may be growing caution in the housing market, the equity release sector has enjoyed a buoyant start to the year. 

“More than £1.3bn of equity was unlocked in Q1 this year – the highest first quarter on record – and over 12,500 equity release plans completed. 

“In part, the rebound in the equity release sector following the pandemic could be down to those in later life choosing to unlock their equity to boost their income as the cost of living rises and there are more opportunities for discretionary spending. 

“More than a quarter (29%) chose to use these funds to manage unsecured debt, while 42% are putting their housing wealth to work to repay outstanding mortgages. In addition, the equity release market also continues to play a strong role as the Bank of Mum and Dad, with 19% of over-55s using the funds to help loved ones buy a home of their own.

“Even as the base rate and inflation continue to climb, these are all signs that equity release is continuing to play an important role in retirement plans today, and our market clearly remains resilient and growing in 2022.”

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