In just three years the Equity Release market has doubled in size with retired homeowners releasing new property wealth to a value of £3.6bn in 2018. The market saw a 19% increase, up from £3.01bn in the previous year.

With additional drawdown and further advances taken into account, the market, according to independent equity release adviser Key, is close to £4 billion.

Figures from Key’s 2018 Equity Release Market Monitor shows that homes paid out nearly £10 million a day in 2018 with customers releasing an average £76,500 to improve their standard of living in retirement. Londoners received the biggest cash boost at £136,850. Plan sales across the country rose by 21% in the year to 47,081.

Gifting
The number of customers using money to help families rose to 27% in 2018 from 24% the previous year. However, in terms of money released, 40% went towards gifting and this increases to over 50% for borrowers living in higher value properties over £1 million.

Gifted money is typically being used to clear debts, pay for significant life events such as weddings or to fund house deposits. Key’s figures show other major uses of gifts are to pay for family holidays, fund university/school fees, buy cars and to pay for day to day living.

The most popular use remains funding home and garden improvements with 64% re-investing some or all the money in their houses – often to “age-proof” the property. Around one in three (33%) paid for holidays and 31% used some or all the cash to clear credit cards or loans while 22% paid off existing mortgages.

Will Hale, CEO at key, said that people taking out a lifetime mortgage do so on either a needs basis or a wants basis.

Needs-based might be due to people holding an interest-only mortgage or clearing debts, which are likely to be the younger range of the 55+ age group. The older age group might need to use money to modify their home to enhance later life living.

Wants-based is more to do with improving retirement lifestyle and, increasingly, gifting to family members.

Will Hale commented: “The growth in gifting highlights the intergenerational benefits of equity release for families with money being used to clear debts, fund university fees and pay for house deposits and weddings. Even the use of equity release to fund home and garden improvements has benefits for families as it helps people to ‘age-proof’ their home and preserve wealth for the family.

“Debt remains however a major issue for some retired people and substantial numbers are relying on equity release to clear credit cards and loans as well as paying off mortgages. Good specialist advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”

Age and status
The most popular age group for taking out a lifetime mortgage is 70-74 (29%) but the number of younger people, aged 55 to 69, has increased to 42% in 2018 from 36% the year before.

Although most equity release plans are taken out by couples (62%), this fell from 66% in 2017 – the first fall on record. A quarter of singletons (26%) are female and 13% are male. Many of these single people are widowed but there has also been an increase in divorced singletons using equity release.

Drawdown
Drawdown plans remained the biggest sellers accounting for around two thirds (64%) of all sales, including 15% in enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions. Lump sum lifetime mortgages made up 36% of sales, including 13% of enhanced plans.

New developments
Key has outlined some new developments in the lifetime mortgage market which includes the three-year rule around early repayment charges. This is where the ERC is waived for three years following the death, or move to a care home, of one partner within a couple. This means the whole loan can be repaid and, if the borrower wishes and it is financially viable to do so, can remortgage to a new equity release product on a lower interest rate. This product has been around for a year or so and is being embraced by more lenders.

Another innovation is to increase serviceable options. This could mean capital repayments of 10% a year can be made and options to move in and out of rolled up interest. Just Group has recently launched a flexible options along these lines.

Key also says there will be more innovation around drawdown.

Contact me now, David Griffin for more information on Equity Release Mortgage – 01204 884 545