Later Life

Equity release market rebounds as UK property wealth surpasses £6 trillion: ERC

Rozi Jones
8th April 2021
House money pound price growth
"Property wealth ranks second only to pensions in terms of its importance to household finances across the country."

The total value of UK private property passed £6 trillion for the first time at the end of 2020, as market activity recovered from the first coronavirus lockdown, according to the latest report from the Equity Release Council.

Discounting mortgage debt, the amount of UK property equity which is privately owned reached a record £4.6 trillion.

In the equity release market, the number of products available to consumers rose to record highs with 100 new products added in H2 to reach 488 in total. This is more than double the 202 products available two years earlier.

Access to retirement interest-only mortgages also improved last year with more than 100 products available for the first time.

The average lifetime mortgage product rate reached a record low of 3.95%, more than half a percentage point lower than in January 2020. Nearly three in five (58%) lifetime mortgages now offer rates of 4% or lower, including 26% priced at 3% or less.

The figures also show that the volume of new equity release plans taken out rose 19% during H2 2020, compared to the first six months of the year as consumer confidence and businesses showed resilience.

Although new customer activity remained 6% below pre-pandemic levels in H2, it showed signs of underlying market resilience by surpassing 20,000 plans agreed between July and December.

In the face of economic uncertainty, new plans were down 10% year-on-year compared with an 11% fall in further advances and a 21% fall in returning drawdown customers.

Across the whole of 2020, 72,988 new and returning customers were served, collectively accessing £3.89 billion of property wealth.

The average loan-to-value of UK property reduced to 24.6%, the lowest level seen since before the 2007/8 financial crisis.

David Burrowes, Chairman of the Equity Release Council commented: “After the unprecedented upheaval of early 2020, the equity release market showed signs of recovery as households and businesses remained resilient against a challenging backdrop. Property wealth ranks second only to pensions in terms of its importance to household finances across the country. The transformation of later life mortgage products in recent years has given people more opportunities to access property wealth at affordable rates.

“Accessing property wealth will play a vital role in retirement planning, both now and in the years to come. For today’s retirees, it can make the difference between making ends meet or enjoying a more comfortable lifestyle by boosting their pension income, improving or adapting their homes life and paying for domestic care support. For younger generations, it can open up the possibility of receiving a ‘living inheritance’ to support their own financial goals, such as getting on the property ladder.

“2021 is a milestone year that marks the 30th anniversary of the first equity release standards. Today’s market has added choice and flexibility to the robust protections and guarantees that give consumers confidence that modern equity release is safe and reliable. We will continue to work with industry, government, policymakers, regulators and consumer bodies to ensure the products and advice available continue to serve customers’ changing needs.”

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