This is according to the Equity Release Council which has reported a ‘busy’ year-end with 11,566 new plans being agreed by over-55s in the final quarter of 2020.
Its latest report revealed annual lending to new and existing customers was £3.89 billion in the quarter as favourable pricing saw the average interest rate fall to 4.01% midway through the three month period.
Indeed, the lowest rates were 2.30% which is less than the average 10-year fixed rate mortgage according to the Equity Release Council.
Most cases were completed in October, as the market bounced back from the Spring lockdown.
However the Council also revealed there were 10% fewer new plans agreed at the end of 2020 than in 2019 and 11% fewer customers were seeking futher advances.
What’s more 21% fewer people made drawdowns from existing plans.
David Burrowes, chairman of the Equity Release Council, said today’s figures offered ‘encouraging signs’ of market resilience after a year that presented huge challenges to household finances and business operations.
He added: “Over the last decade, releasing equity to boost your finances in later life has grown from a niche pursuit to a competitive market that has stabilised at £3.9 billion of lending activity for the last three years, despite significant headwinds driven by Brexit uncertainty and the Covid-19 pandemic.
“The unusual patterns of activity in 2020 show some customers biding their time before accessing property wealth. New plans were delayed from earlier in the year and fewer customers have made use of drawdown reserves or sought extensions of existing loans.”
Industry optimism
Alice Watson, head of marketing, insurance at Canada Life said the data showed the market had ‘remarkable resilience’.
She revealed how Canada Life’s survey of equity release advisers uncovered optimism in the industry with 72% of those quizzed saying they expected the value of the market to grow further this year – mainly through younger customers with an appetite for larger loans.
“While we are not yet at the levels of activity seen before the pandemic, 60% of advisers feel that Q2 2021 will see a return to pre-pandemic business,” Watson said.
“While releasing equity from a home remains a very significant decision, we know that families across the country are seeing new strains on their personal finances, whether that’s from redundancy, rising living costs or new caring responsibilities.
“For example, we know that 3.5 million grown-up children have returned to the family home adding on average £425 a month to living costs.
“This collective strain is likely to continue being exacerbated by the pandemic and, with the right advice, equity release has proven it can help people to access their property wealth flexibly and safely.”
