Equity Release Supermarket (ERS), the UK’s No.1 independent equity release advisory service, reflect on Q1 findings, along with shifts in equity release usage and behaviour.
Data released by the digital pioneers revealed a shift in the usage of funds, with 59% more customers gifting some of their funds to their children compared to the same period in 2020. A staggering 123% boost in house purchases was also reported along with a rise in the purchases of second homes, which increased by 17% compared to Q1 of last year.
Results and shifts could be down to numerous factors but most likely due to the continued support parents provide for their children, particularly those affected by the pandemic. Many young people are striving to get on the property ladder, especially given the benefits of the stamp duty holiday, which is available until the end of June this year, hence parents are using their equity release funds to help support their children become homeowners.
Mark Gregory, Founder and CEO at Equity Release Supermarket commented, “Findings on the usage of funds is probably as you would expect given the advantages of the stamp duty holiday, helping those looking to get on, or move up the property ladder.
“Whilst the government backed mortgage scheme, which launched mid-April, offering first time buyers 95% LTV mortgages is welcomed, even a modest £10,000 deposit on a £200,000 property is a significant amount of money for those who have been unable to start saving.
“This also doesn’t help or support those who already own a property and are looking to upscale or move up the ladder. Rightmove reported a 2.1% increase in house prices in April, up to a record house price average of £327,797 – hence, the shortage of property on the market is really driving up these prices.”
Equity Release Supermarket also noted a vast rise in sales across the London area. Their average value of the amount borrowed in the Capital increased by 39% YOY, whilst the average case increased by 33%.
Furthermore, sales across the southern region of the UK witnessed a notable rise in comparison to last year. London, the South East and the South West all accounted for 52% of sales in Q1 of this year, as well as 64% by value – an increase of 11% compared to the same period in 2020.
Mark added: We’re seeing a resurgence in consumer confidence return to the ‘core’ regions of the UK, with the Stamp Duty holiday and easing of lockdown restrictions playing a key part in this heightened recovery.
“High-net-worth property owners taking advantage of low interest rates and the flexibility that many lifetime mortgages now offer, such as fixed term early repayments charges, have also driven the higher case values reported across London.”
In comparison to Q1 last year, utilising money borrowed to repay debts fell by 41%. Other reported usage decreases were new car purchases, falling by 57% and holidays, which dropped by 70%, mainly due to the comfort consumers are taking with having more money in their pockets, plus the travel restrictions which halted holiday spend.
Mark went on to say: “Whilst we’ve ensured that all our digital functionality was in place at the start of the pandemic, if not before, to support our customers, what’s somewhat surprising is the continued adaption consumers have taken to remote advice – 8% now prefer to use a combination of telephone and video to communicate, which was the equivalent number of consumers engaging in face-to-face advice in the same period. In stark contrast, 37% of sales were from face-to-face advice alone in Q1 of last year.
“As a business, Equity Release Supermarket has continued to grow in Q1. Our level of enquiries and interest grew by 21% YOY and the value of applications increased by 15%.
“March alone also saw a sharp rise of 47% in the level of enquiries and interest, plus the value of applications rose by 22%. What’s more our revenue was the equivalent to that reported in 2020.
“Our business performance as a whole is testament to the quality of our advice, our dynamic and talented team of advisers and our forward-thinking approach. Despite being in lockdown throughout Q1 of this year, unlike last year, we have still grown and reacted quickly to our changing customer needs.”