The Analysis News & Opinions
Equity-release figures show profound development
Customers accessed £3.92bn of property wealth in 2019 despite a cautious economic climate, according to year-end market figures from the Equity Release Council (ERC). The market has witnessed steady growth
in the space of a decade, with the amount accessed by older homeowners per year growing from £945.97m in 2009 to £3.92bn by 2019, representing an almost four-fold increase over the course of the decade. However, last year saw the market consolidate its growth, with lending volumes remaining largely unchanged since 2018 when £3.94bn was unlocked. The final quarter of 2019 was the busiest
period of the year, with more than £1bn unlocked. Consumer demand continued to grow:
2019 saw the total number of customers served reach a record high of 85,497, of which 44,870 took out new plans (compared to 46, 297 in 2018) following a detailed process of regulated financial and independent legal advice.
Product features Increased product features and flexibilities, such as the ability to make voluntary or partial repayments with no early repayment charge, helped fuel this long-term growth in product uptake. Additionally, the ERC’s Autumn 2019 Market Report showed that the average interest rate dropped to a record low of 4.91% in September 2019, partly the result of increased competition across the market. The number of returning drawdown
customers also increased by 3,676 over the course of the year, up by 11%, while the number of further advances and releases increased by 557 (15% increase). The most popular product amongst older
homeowners continued to be drawdown mortgages, with nearly two in three (64%) new customers opting for a drawdown product versus a lump-sum product. Furthermore, while the customer base has
grown to new levels, the average amounts withdrawn by homeowners have remained steady as customers are advised to unlock
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values appropriate for their foreseeable financial needs. During 2019, average withdrawals from
new drawdown lifetime mortgages remained broadly consistent with 2018, with the average customer unlocking £63,963 – double the annual income of a retired couple. The average new lump sum customer
unlocked £97,282, triple (3.1 times) the annual income of a retired couple, and a modest increase of 2.4% from 2018’s average withdrawal. The average new plan for lump-sum
lifetime mortgages was £97,282, up 2.4% on 2018. The average drawdown lifetime mortgage new plan was £63,693, down 0.5% on 2018.
Standards Alongside this market consolidation, the ERC recently evolved its standards to introduce an approach based on principles and consumer outcomes, which reflect the latest thinking in financial-services regulation and complements the existing rules, safeguards and protections. These updated standards, build on the work which began in 1991 when consumer-
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focused equity-release product standards were first introduced. David Burrowes, chairman of the ERC,
said: “After a period of steady growth, the market has reached a point of consolidation in 2019 with lending volumes in line with 2018. The sector enters 2020 in a strong position with updated standards and a greater number of diverse members signed up than ever before. “Looking ahead, we will continue to work
with stakeholders to ensure consumers are able to access the best advice while ensuring joined up financial planning so that equity release remains a key consideration in mainstream retirement planning. “Previously viewed as a niche product to
support people’s retirement plans, the untapped potential of equity release is now being recognised. This comes as a growing number of customers are recognising the important role property wealth can play in meeting their retirement needs. “This has been driven by competition,
falling interest rates, increasing numbers of flexible and innovative product options and supported by rigorous standards in the market.”
February 2020
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