£1.06bn accessed through equity release in first quarter

Property wealth worth £1.06bn was accessed through equity release products in the first quarter of 2020, new data released by the Equity Release Council (ERC) has revealed.

The ERC’s Q1 2020 Equity Release Market Statistics revealed this figure was up by 14% from £936m a year earlier.

The trade body suggested the rise was driven by the return of consumer confidence in the early months of 2020, following political and economic uncertainty in 2019, before the onset of coronavirus in the UK and the lockdown measures were implemented by the Government.

The new data suggested equity release is still continuing 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 or over, to 11,079 in the first quarter of the year – the largest total for any Q1 period since the ERC's records began in 1991.

ERC chairman, David Burrowes, said: “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.

“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.”

The ERC’s data also showed the total number of new and returning customers served in the opening quarter had remained steady, reaching 21,884, which was up 7% from 20,397 in Q1 2019. Fewer customers, however, sought further advances on existing plans than in the previous quarter – with 1,000 in Q1 2020 compared with 1,141 in the final quarter of 2019.

more2life CEO, Dave Harris, suggested that moving into the second quarter of 2020, the market’s landscape had become “drastically different.”

“The coronavirus pandemic has seen the average equity release customer self-isolating and the industry considering how it can maintain safeguards while still supporting those who need equity release,” Harris said.

“Continued collaboration amongst funders, lenders and trade bodies to ensure that the solutions customers need during these uncertain and challenging times are available is needed.”

Group communications director at Just Group, Stephen Lowe, added: “Without the social distancing restrictions required to fight coronavirus which started from mid-March, we may well have seen the last quarter top the record £1.08bn recorded in Q4 2018.
 
“Instead, we have seen a market quickly rethink how it does business, overcoming challenges such as how to ensure customers can still benefit from specialist regulated financial and legal advice without face-to-face contact and how to produce fair valuations without visiting their homes.
 
“This transformation, along with more flexible options such as the payment holidays that are now built into all our interest-serviced policies, have helped customers and kept the market open to help meet the needs of future customers at what may be a time of significant stress.”

The data also showed that customer activity has grown sustainably from a low base over the last decade, as the ERC suggested the market is growing to meet the long-term challenges of supporting the UK’s ageing population.

Over-55s make up 30% of the UK population – equating to more than 20 million people, the statistics revealed – while 56% of households who own their own home, either outright or with a mortgage.

The ERC also highlighted that property wealth in the country is estimated to be worth £5.09trn, which accounts for 35% of the nation’s total wealth and assets.

Commenting on the future for advice in the market, Will Hale, CEO at Key, said: “While the ‘new normal’ will undoubtedly have an impact on the market, we have seen the entire industry step up to help customers with developments such as semi-automated valuations, telephone-based advice and a more flexible approach to providing independent legal advice.

“Releasing money from your home is an important long-term decision and it is vital that all the risks and benefits are properly considered during a period when customers may be feeling more worried than ever about their future and that of their wider family.
 
“Good specialist advice is crucial and that may mean recommending customers do not proceed at this time. We believe that helping customers to make choices that will stand them in good stead for the long term – especially when there is so much uncertainty at the moment – is the only correct approach.”

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