Wealth Growth

Wealth Boost Amidst the Pandemic

The COVID Pandemic Has Struck All of Us Hard and It Stands to Reason That There Would Be an Overall Slowdown With the Economy. Despite That, There Has Been a Significant Wealth Boost at This Time, Let’s Check It Out.

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Wealth Growth During the Pandemic

According to figures from Key1, the UK’s biggest equity release consultant, older homeowners earned a £1.94 billion property2 wealth boost in the first half of the year as the equity release market continued its remarkable comeback.

In the six months to June 30th, the number of equity release plans taken out increased by 3% to 20,445 from a year ago, while the total value of new stock3 released increased by 32% from £1.47 billion to £1.94 billion. A further £666 million has been set aside for future usage.

Customers are releasing more equity to meet ‘big ticket’ expenses such as mortgage4 and unsecured debt repayment (av. £74,894) and gifting (av. £72,520) rather than holidays (av. £16,458) and home improvements (av. £16,907), with the average amount of equity released increasing to £94,982 (H1 2021 – £72,340).

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However, with a strong housing market5 pushing the average home utilised for equity release up 15% in value from £321,209 to £368,883, LTVs have stayed constant (26% from 23% in H1 2020).

The total value of new equity released in the first half of 2019 before the commencement of COVID-196 was £1.94 billion, which was higher than the £1.68 billion released in the first half of 2019 before the onset of COVID-19 as the market recovered.

How the Money Benefits Customers?

More than half of the equity release funds (52%) were used to pay off mortgages (45%) and manage unsecured debts (7%), while 23% was used to support relatives and friends, particularly with housing deposits as buyers rushed to beat the Stamp Duty holiday’s expiration.

An average of £74,894 in borrowing was returned and £72,520 was gifted for these “big ticket” expenses. Over half of those who used their equity to help family and friends used it to pay for a housing deposit (52%) or an early inheritance (59%) – some of which was undoubtedly used to acquire a home.

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How Are Plans Implemented?

In the first half of the year, roughly 71% of customers took out drawdown plans, with consumers taking an initial average of £56,744 and reserving another £666.4 million for future usage.

During the last six months, 14,589 previous clients returned to take out an average of £13,765 to help fund their retirement7, and the number of people returning to take out more money is projected to rise.

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Regionally:

Apart from Northern Ireland, every region saw the value of property wealth released increase, according to Key’s Market Monitor, which analyses data from the entire market.

London witnessed the largest increase of 74%, while Wales saw a 42.1% increase and 7 other regions saw double-digit increases.

Wales showed the largest increase in plan sales, at 24.1%, followed by London at 22.6%, and plan sales increased in seven of the 12 areas.

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Common Questions

How Much Can You Raise With Equity Release?

Are There Any Benefits to Equity Release?

In Conclusion

The equity release revolution has been fueled by advisers, who are key to making this process easy and enjoyable for their clients. Equity release is a way that many people have found to unlock the value of their home, but it can be intimidating or overwhelming without professional guidance.

For those considering releasing equity from your property in order to fund retirement, you will want an adviser whom you trust with your financial future guiding you through all aspects of the process.

Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

Contributors: Nicola Date, Katherine Read
Reviewed by Francis Hui

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Written by
Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
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Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.
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Written by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
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Written by
Katherine Read
Financial Planning Reporter

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.
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Written by
Nicola Date
Writer & Financial Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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