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Rising house prices enabled older homeowners to release more than £1 billion in property wealth in the first three months of the year – the equivalent of more than £11.3 million a day, data from the UK’s leading equity release adviser Key shows.
The average customer received £103,710 – an 25% increase over the £83,242 released in the first quarter of 2020 – highlighting how over-55s are confidently using their housing equity to support family and ease the pressure on income by managing debt. Total equity released (including drawdown and further advances) in the three months to March 31st increased by 12.8% to £1.07 billion from £950.59 million in the same period last year despite plan sales falling by 9.5% to 10,341 from 11,423.
Buoyant house prices (+5.7% YOY) no doubt played a role in boosting the amount released as the average LTV only rose 2% on an annual basis (from 25% in Q1 2020 to 27% in Q1 2021). The average price of a house used for equity release also rose 12% to £366,660 from £326,486 last year and were substantially higher than the national average house price of £232,134 in March.
The amount of reserved drawdown and further advances taken dropped by 6% from £146.30 million last year to £137.86 million. The biggest drop was in reserved drawdown which fell from £123.85 million to £112.39 million.
How the money is used:
Around three-quarters of the money was spent on clearing mortgages (34%) and unsecured debts (26%) while continuing to help families with gifting (21%). Fewer people managed mortgage (23%) or unsecured (25%) debt in Q1 2020 with the aid of equity release but even with the Stamp Duty bounce driving the market, we saw more gifting (29%) in the first quarter last year.
Unsurprisingly, the amount spent on holidays fell to just 1% (from 8% in Q1 2020) and we saw only 7% of the equity released used for home improvements (from 17% in Q1 2020) as over-55s focused on essential rather than aspirational spending. That said, while the proportion of customers who spent money on home improvements more than halved from 63% (Q1 2020) to 31% (Q1 2021) some essential renovations to make homes ‘retirement ready’ were undertaken.
Will Hale, CEO at Key, said: “The strength of the property market driven by the extension of the Stamp Duty Holiday and the launch of Government guarantees for over 95% LTV mortgages is helping to increase the property wealth that over-55s can use for retirement planning. However, the equity release market is building its own momentum and demonstrating continued resilience as client look to it for support with debt management and gifting.
“The average amount released at more than £103,710 demonstrates how important property wealth is in meeting customers’ wants and needs while the rise in the average value of homes owned by customers’ shows how wealthier customers are looking to use their homes. Lower interest rates and greater flexibility driven by lenders focus on product development is adding to the momentum as the sector continues the journey to become a true later life lending market built on the foundations of specialist advice.” Across the regions:
Key’s Market Monitor, which analyses data reflecting the whole market, shows Wales was the only region to record a rise in plan sales during the three months but eight of the 12 regions saw the total value of new equity released increase.
Plan sales in Wales rose by 29% in the first quarter of 2021 compared with the first quarter of 2020 and the total value of new equity released climbed by 51%. The next biggest increase in the total value of new equity released was in the North East which recorded an 25% rise followed by the South East which saw a rise of 21%.
The strength of the housing market in the South East and London meant those regions accounted for more than half of all equity released during the quarter despite accounting for 34% of plans sold. The table below shows the breakdown across the country:
* Key market data for 2021 Q1. The Monitor uses Key’s data to reflect the market as a whole. The data reflects both members and non-members of the Equity Release Council and provides the most detailed analysis of the equity release sector. The figures reflect new customers and the equity they released rather than any ongoing withdrawals via products such as drawdown. Nationwide House Price Index https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2021/Mar_Q1_2021.pdf was used for the house prices.
For more information or to request a case study, please contact:
Lee Blackwell Director of Public Relations and Public Affairs
Key Group 07384511140
E-mail: [email protected]
Part of Key Group, Key is the UK’s largest independent equity release adviser – committed to high levels of customer service and the belief that good advice is key to ensuring people make smart sustainable choices around how they use their housing equity.
Last year, Key split its advice proposition into separate brands – Key Equity Release, offering fee free advice on more than 80 equity release products and The Equity Release Experts, which provides a whole of market service. This evolution is designed to offer customers real choice as to the service that’s right for them without compromising on quality.
With over 60 industry and consumer awards under their belt, the Key team offer advice on equity release, later life mortgages and retirement interest-only products. The company also provides support with estate planning including wills and lasting power of attorneys.
Key is committed to putting customers at the heart of what it does and has a score of 4.9 / 5.0 from over 15,500 scores on the independent review site, Trustpilot.
Key is committed to being independent, transparent, and straightforward.