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).
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.
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.
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.
How Much Can You Raise With Equity Release?
The maximum amount you can borrow with equity release is usually up to 60% of your home’s worth. The precise amount is determined by your age, the value of your home, and other considerations such as the kind of building.
Are There Any Benefits to Equity Release?
Equity release might give you a substantial quantity of money while allowing you to remain on your property. It’s especially important for paying for major bills later in life, such as long-term care.
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.