Older homeowners release an average £111,500 in property wealth

by | May 25, 2022

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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.

Market Boosted by House Price Increases:

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 £1.399 billion – 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 million 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, we 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:

 

Region

Number of plans sold Q1 2022

% change on Q1 2021

Total value of new equity released Q1 2022 (£ million)

% change on Q1 2021 (£ million)

South East

2,872

Up 13.2%

£391.448

Up 14.6%

London

1,006

Down 0.6%

£234.476

Up 17%

South West

1,480

Up 17.1%

£184.579

Up 51.8%

North West

1,211

Up 16.1%

£96.372

Up 26.1%

East Midlands

1,105

Up 36.9%

£86.516

Up 34.7%

West Midlands

1,047

Up 26.4%

£100.076

Up 55.1%

East Anglia

754

Up 15.2%

£76.771

Up 36.8%

Yorkshire & The Humber

1,000

Up 51.4%

£71.635

Up 66.2%

Wales

713

Up 17.4%

£59.722

Up 48.5%

Scotland

819

Up 46%

£64.314

Up 63.8%

North East

439

Up 35%

£26.138

Up 15.3%

Northern Ireland

105

Up 151.1%

£7.466

Up 248.7%

UK

12,551

Up 21.4%

£1.399

Up 30.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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