Confidence growing in the equity release market – Key

But last year's mini budget and ongoing base rate rises linger

Confidence growing in the equity release market – Key

Customer confidence in the equity release market is starting to improve with the average amount released by customers increasing, according to equity release adviser Key Later Life Finance.

Key’s latest Equity Release Market Monitor, however, noted that the hangover from last year’s mini budget and ongoing base rate rises was lingering and continued to affect market.

The research found that the number of plans taken out fell by 11% to 6,219 in the second quarter compared to the first three months of the year, while the total value of new releases was 9% lower at £518 million. Despite this, the average amount released increased by 2% to £83,340 as available loan-to-values (LTVs) rose.

When compared to the first half of 2022 – the midpoint in a record-breaking year for the market, plan sales in the first half of this year were 48% lower at 13,194 and the total value of new releases dropped 57% to £1.09 billion. The average amount released in the first half of last year was £100,468 compared to just £82,475 in first half of this year.

The Market Monitor also revealed that in H1 2023, almost a third or 32% of the money released was used to repay mortgages, 14% was spent on rebroking existing equity release plans, and 5% was used to pay off unsecured borrowing. One in five customers used property wealth to help family, while 45% used some or all of the proceeds on home renovations.

Key pointed out that the average age of customers in the first half of 2023 increased by a year to 71 as lower LTVs and higher rates saw younger customers consider a wider range of options. Around one in four customers in the six months were under 65, and they tended to use equity release to manage secure and unsecured debts.

“As with all other residential property markets, the later life lending market has had a tough start to the year, but all the indicators suggest that the second half of the year should be stronger than the first half,” commented Will Hale (pictured), chief executive at Key Later Life Finance.

“Indeed, we’ve started to see some green shoots with the average amount released increasing slightly and more spending on gifting, home improvements, and other discretionary expenses in Q2.”

Ben Waugh, managing director at more2life, said that while the figures made sobering reading, it was not something that would come as a surprise to anyone involved in the later life lending market.

“Unsteady consumer confidence, sharp rate increases, and an uncertain property market have encouraged customers to hold off making decisions,” Waugh explained.

“With inflation falling to 7.9% in June and the property market proving to be more robust in 2023 than originally thought, there are green shoots which are being fanned by an increasing acceptance that housing equity can – and should – play a role in more people’s retirements.  The latter point is especially pertinent at a time when older mortgage borrowers are facing not only a cost-of-living crisis but an affordability squeeze.

“The H1 2023 figures released today underscore our belief that we will see a market below the record-breaking totals seen in 2022 but I am confident that we will see a stronger H2.”

Hale added that as customer confidence started to improve and lenders stepped up to the challenge of meeting their demands, they expected overall borrowing to increase and more people to benefit from accessing their housing equity.

“This could arguably not come at a better time as even with the bumper state pension increases and the government’s mortgage support measures, the cost-of-living crisis continues to be felt,” he said.

“Looking to the future, while the modern equity release products available have more in-build flexibilities than ever before – and the rates are comparable to those on residential mortgages – we do expect the sector to evolve.

“This is vitally important to ensure that we can support underserved areas of the market, and I feel confident saying that we will also see some significant product innovation before the end of the year.”

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