Value of equity released drops just 4% in 2020

Older homeowners released more than £3.4 billion in property wealth in 2020, with plan sales falling by 12.5% but the amount released holding steady with a drop of just 4.4%, according to the latest data from Key.

Related topics:  Later Life
Rozi Jones
21st January 2021
equity release house plan mortgage sign house paper
"The fact that we have only seen a 4.4% drop in the value of equity released suggests that customer demand remains strong supported by the efforts of advisers, lenders and other service providers"

On an annual basis, there were 40,470 plans agreed, down from 46,247 in 2019. The amount released totalled £3.456 billion, down from £3,595 billion in 2019.

However Key reported a stronger end to the year, with 9,930 people releasing over than £1.1 billion in Q4.

With house prices increasing by 6.43% over the last twelve-months, LTVs remained steady at 26% across all equity release borrowing and average interest rates fell from 3.15% in Q4 2019 to 2.8% in Q4 2020.

Key says a trend towards using equity release to refinance debt and support families via gifting saw the average amount released increase by 9.2% from £77,735 in 2019 to £84,919.

Helping younger family members was also high up the agenda with £755 million being transferred between the generations in 2020. With the stamp duty holiday coming to an end, 43% of these gifts were earmarked for housing deposits and 26% for an early inheritance.

Will Hale, CEO at Key, said: “While 2020 is down on 2019, the fact that we have only seen a 4.4% drop in the value of equity released suggests that customer demand remains strong supported by the efforts of advisers, lenders and other service providers in this challenging year.

“Discretionary spending has fallen as equity release increasingly looks to support clients’ aspirations to help their families and make their finances as resilient as possible by refinancing debt. While most people aspire to reach retirement without any mortgage or unsecured debt, this is certainly not possible for everyone and equity release can help to take the pressure of these families while still providing avenues for repayment.

“With the end to the stamp duty holiday on the horizon, it is also not entirely surprising to see that many older homeowners have taken the opportunity to pass wealth down the generations and help children or grandchildren onto the property ladder. While this may change as we head in 2021 and the holiday comes to an end, I suspect the desire to help families will remain a strong driver of this market in years to come.”

 

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.