Equity release market hit new highs in Q1 2022

Older homeowners are turning to equity release to cope with rising inflation

Equity release market hit new highs in Q1 2022

Data from equity release adviser Key Later Life Finance showed that older homeowners released an average of £111,500 in property wealth in the first quarter of this year – a new high for the equity release market.

Compared with last year, plan sales surged by 21.4% in the first three months of the year to 12,551, while the value of new equity released soared by 30.5% to just under £1.4 billion – the highest on record for the industry.

Key said the strength of the housing market meant that 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.

Read more: Equity release hands UK economy a £3.8 billion boost in GVA.

Key said low rates and increasing flexibility of equity release plans are driving an increase in remortgaging – it 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.

The number of customers (42%) using equity release to repay their mortgages also hit an all-time high as people seek to manage their outgoings in the face of inflation.  

Will Hale, chief executive at Key, noted that with the country facing a challenging inflationary environment, older customers are 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,” he said.

“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.”

Read more: Equity release choice nearly triples in one year.

Meanwhile, Key’s Market Monitor, which analyses data reflecting the whole market, showed 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 the capital.

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%.

Key’s data also revealed that 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.

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 showed.

“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,” Hale said.

He also pointed out that there is a wealth of information online for customers to educate themselves on later life finances. On Key’s website, he said, consumers can use the later life mortgage finder tool to find out further information, as well as being able to download a full guide regarding later life finances.