Pent-up demand led to £1.06bn of equity release activity in Q1 before lockdown took effect

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1. Summary

• £1.06bn of property wealth was accessed via equity release products in Q1 2020, up by 14% from £936m a year earlier.
• This was driven by the return of consumer confidence in the early months of 2020, following an uncertain 2019, before the onset of coronavirus and UK lockdown measures.
• Equity release continues to attract attention from consumers as a mainstream financial product for later life, with a 2% increase in new plans agreed by homeowners aged 55+ to 11,079 in Q1 2020 – the largest total for any Q1 period since records began in 1991.
• Property wealth typically used for a range of purposes include providing additional retirement income, funding one-off expenses and lifestyle purchases, meeting homecare costs and gifting a ‘living inheritance’ to family or friends.

David Burrowes, Chairman of the Equity Release Council said:

“These figures reflect the return of consumer confidence to the broader UK economy at the start of the year, after December’s election promised to restore certainty before coronavirus took hold.

“Pent-up demand from 2019 meant homeowners continued to look to property wealth in growing numbers for later life finance in January and February, backed by strong consumer protections and increasing product flexibility.

“As the nation has since adjusted to life under lockdown, the market has adapted to find solutions for the safe provision of advice and valuations, enabling customers to chose the option of equity release while respecting social distancing guidelines.

“Equity release is a carefully considered choice made by weighing up both short- and long-term needs through a detailed financial and legal advice process.

“Beyond the current uncertainty, property wealth will continue to play an important role as part of a multi-asset approach to meet financial needs in later life.”

2. Key statistics for Q1 2020

Overall activity

• The total number of new and returning customers served in Q1 remained steady, reaching 21,884, up 7% from 20,397 in Q1 2019.
• £1.06bn of property wealth was accessed, down slightly from £1.08bn in Q4 2019 in line with seasonal trends but up by 14% from £936m in Q1 2019.
• The number of new plans taken out was the most seen in any Q1 period at 11,079, as was the total amount of property wealth unlocked.
• Fewer customers sought further advances on existing plans than in the previous quarter – 1,000 in Q1 2020 compared with 1,141 in Q4 2019.

Market context

• Customer activity has grown sustainably from a low base over the last decade as the market grows to meet the long-term challenges of supporting the UK’s ageing population.
• Over-55s make up 30% of the UK population (over 20m) according to the latest estimates* and 56% of households who own their own home, either outright or with a mortgage**.
• Property wealth in Great Britain is estimated to be worth £5.09 trillion, accounting for 35% of the nation’s total wealth and assets***.
• Low average equity release interest rates continue to feature as a key trend in the market, with the average interest rate in January 2020 at 4.48%****.

Trends among new and returning customers

• Drawdown lifetime mortgages remained the most popular type of new plan agreed, albeit with a lower share (57%) than a year earlier (64%) as the number of new drawdown plans totalled 6,267.
• The average size of the first instalment of new drawdown plans rose 2% from Q4 2019 to reach £68,492, with a further £39,214 reserved for future use.
• Returning drawdown customers continued to grow in number, as a result of more people having taken out these products in recent years – allowing them to access property wealth in stages from an agreed pot and limit interest costs.
• Q1 2020 saw 9,805 returning customers make use of drawdown facilities. The average drawdown instalment taken rose modestly by 3% year-on-year, from £11,317 in Q1 2019 to £11,611 in Q1 2020.
• Lump sum lifetime mortgages made up 43% of new plans arranged in Q1 2020, up from 36% in Q1 2019, with 4,811 new plans taken out in total.
• The average size of a new lump sum plan was £102,443 in Q1 2020, broadly consistent with the £101,058 average seen in Q4 2019.
• The number of lump sum further advances decreased by 10% over the last quarter to 426 in Q1 2020, down from 471.
• Appetite for home reversion plans remained low as they continue to make up below 1% of new plans agreed.