Figures out today from the Equity Release Council (ERC) also revealed the number of new equity release plans being taken out between April and June fell by 34% from 11,079 in Q1 to 7,341. This is the lowest experienced in any quarter in the last four years.
This decline, along with the amount of property wealth being accessed tumbling by almost £400 million to £698 million compared to Q1, was a reflection of wider lending trends, the ERC said.
It compared these falls to Bank of England data for April to May which showed gross lending secured on dwellings was down 36% when compared to February and March.
David Burrowes, chairman of the ERC, said the market activity ‘mirrored’ the wider economic conditions as households became more cautious as they assessed the impact of coronavirus on their everyday lives.
“Careful precautions have kept the market open to those who wish to choose the option of equity release and ensured customers have access to property wealth to help meet important financial and social needs,” he said.
“That said, the fall in the number of new plans and fewer returning customers accessing extra funds are clear signs of people pausing to see how the wider situation unfolds.”
The data showed May was the quietest month for new plans before initial signs of recovery emerged in June as lockdown conditions began to ease.
The ERC said customers held back from making further drawdowns from existing plans or seeking further advances as they waited to see the long-term impact of Covid-19.
Spending less
The figures came as no surprise to professionals in the equity release sector who were prepared for the data to correspond with the rest of the market.
Dave Harris, CEO of more2life, said with many consumers spending less, particularly on large purchases, the need to borrow has lessened.
And he said more2life’s latest research found that the over-55s in particular were set to borrow £19 billion less over the next two years as they responded to the disruption caused by coronavirus.
“However, while some older homeowners will look to take a more cautious approach to borrowing over the short-term, others will need to look at all their assets as they carefully plan their finances,” he added.
“Overall, the strong underlying trends that have driven the lifetime mortgage market in recent years remain and we would expect to see a gradual return to pre-crisis lending volumes later this year.
“As we start to emerge from the crisis, it is vital that our industry continues to support and champion advisers as they provide valuable advice to customers who need it now more than ever.”
