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Will surge in Equity Release help or hinder housing market?

The equity release market is on course for a record year after customers took out £1.049 billion in property wealth in the three months to the end of September.

Data from ER adviser Key shows that the total value of equity released rose by 18.8 per cent from nearly £884m in the third quarter of 2020.  

However the number of equity release plans taken out decreased 3.2 per cent year on year to 10,333 and remained below pre-pandemic levels.

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Total equity released in the first nine months of 2021 at £2.989 billion is short of the £3.4 billion released in both 2020 and 2019 putting the market on course for a record £4 billion.  

Around 75 per cent of customers took out drawdown plans in the three months with the average initial advance standing at £57,183 with customers still having the ability to draw a further £301.5 million. 

The average customer is 70 years old which is an increase from 2020 – with 49 per cent of those who take out equity release being between the ages of 65 and 74.

Around £588m of the money released in the quarter was used to clear debts while more than two-fifths of the cash given to family and friends was used for house deposits while 36 per cent was given as an early inheritance.

Using equity release for debt management has been part of the market for many years but more recently, we have seen people remortgaging their existing plans to benefit from recent innovation and the fall in rates. 

Key estimates that by the end of September the market transacted 3,000 remortgage cases with customers on average moving borrowing of £134,597 from a rate of 5.1 to 3.6 per cent.

Will Hale, chief executive of Key, says: “Against the backdrop of a pandemic, the equity release market is on track to break the £4 billion barrier and potentially even touch £4.5 billion by the end of the year. This performance demonstrates how modern equity release products are now embedded within the mainstream financial services market, offering low rates and flexible features to address a wide range of different customer needs and wants.

“This year we’ve seen increasing numbers of people using equity release to support families, manage their current borrowing and use the historically low rates to remortgage their existing equity release plans.  Whilst many plans have been put on hold during the pandemic, we also expect to see the return of people looking to boost discretionary spending as they look again at how to fund their later life ambitions.”

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