• A total of £3.92 billion of housing equity was withdrawn by older homeowners in 2019, in line with last year’s total of £3.94bn, as the market consolidated recent growth
• Market has grown almost four-fold in the last decade, with the annual value unlocked rising from £945.97 million (2009) to £3.92 billion (2019)
• Total number of customers served remained high, with 85,497 older homeowners using their property wealth in 2019

Customers took advantage of record low rates and increasing product flexibilities to access £3.92 billion of property wealth in 2019 despite a cautious economic climate, according to year-end market figures from the Equity Release Council, the sector trade body.

The market has witnessed steady growth in the space of a decade, with the amount accessed by older homeowners per year growing from £945.97 million (2009) to £3.92 billion 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 £1 billion unlocked in Q4 alone. Moreover, it was also one of the busiest quarters on record, second only to Q4 2018 when lending volumes were just 0.1% higher.

Consistently strong consumer demand

Consumer demand continued to grow as older homeowners recognised the crucial role that property wealth can play in supporting their retirement alongside pensions, savings and other assets. 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.

Increased product features and flexibilities, such as the ability to make voluntary or partial repayments with no early repayment charge, has helped fuel this long-term growth in product uptake. Additionally, the Council’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/releases increased by 557 (15% increase), suggesting borrowers are unlocking conservative amounts and only returning should they need to access further sums.

Average withdrawals remain stable year-on-year

The most popular product amongst older homeowners continues 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 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) the annual income of a retired couple, and a modest increase of 2.4% from 2018’s average withdrawal

Average new plan withdrawals

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 evolve alongside market consolidation

Alongside this market consolidation, the Council recently evolved its standards to introduce an approach based on principles and consumer outcomes, which reflects the latest thinking in financial services regulation and complements the existing rules, safeguards and protections.

These updated standards, which represent the largest evolution since the organisation was established in 2012, build on the work which began in 1991 when clear consumer-focused equity release product standards were first introduced. This sets the benchmark for best practice by providing a higher level of consumer protection than any other form of property based loan.

David Burrowes, Chairman of the Equity Release Council 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’ll 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.”