More over-55s using equity release but amounts accessed down

The number of over-55s accessing the wealth in their property via equity release increased in the first quarter of 2020, but they took out more modest sums than previously, new data published by Key has revealed.

Compared to this time last year, the equity release adviser said that plan sales had increased by 6%, up from 11,190 to 11,881, while the amount release actually fell by 3.8% – from £839.6m to £805.2m.

Key suggested its recorded changes were in part fuelled by the increase in the sales of drawdown plans – 72% in the first quarter of 2020 against 66% in the first quarter of 2019 – which it said provides additional flexibility by allowing homeowners to ring fence part of their release for future use. 

The total of reserved drawdown rose from £349.1m in the first quarter last year to just over £390m this quarter, leaving the market value almost unchanged at £1.2bn – having sat at £1.19bn twelve months ago. 

Key CEO, Will Hale, commented: “Following a year of political and economic uncertainty the equity release market started well in 2020 and has proved remarkably resilient given the unprecedented circumstances the UK and the world finds itself in.

“Consumers are more cautious and while we are finding an increased number of people using equity release, they are taking out less and using more drawdown products to help future proof their later life finances whilst mitigating the impact of roll-up interest.”

In its new look Market Monitor, Key also revealed that 37% of all equity released is used to repay debt and 21% is used for gifting, with just 8% being spent on holidays and 17% on age proofing customers’ homes or gardens. 

Furthermore, the research showed over a third (37%) of the proceeds of equity release is used to repay debt – with mortgages (65%), credit cards (16%) and loans (11%) the most common type of borrowing.

Key also suggested those who choose equity release as an option to either repay an outstanding residential or interest only mortgage repay just over £51,000, while those who settle credit cards (£12,186) and loans (£11,856) use more modest amounts.
Hale added: “Our new analysis of the driving force behind equity release decisions suggest that this is a multi-use product driven often by need rather than aspiration with substantially more of the proceeds being spent on debt repayment and helping family members than holidays.

“While in an ideal world, everyone would enter retirement debt free, equity release provides those who are not that lucky with real options – supported by a robust specialist advice process that is designed to help people make the right choices for their individual circumstances.”

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