More than £1bn of property wealth was released in the third quarter of this year, putting the equity release market on course for a record year.
These buoyant quarterly figures from Key’s market monitor indicate that the total sums released during 2021could top £4bn by the end of the year.
This research, which analyses data reflecting the whole market, shows that during the three months to the end of September, a total of £1.049bn was released from properties in the UK, an increase of 18.8 per cent from the same quarter last year.
However while lending volumes increased, the number of equity release plans has fallen 3.2 per cent year on year. There were 10,333 plans taken out in Q3 in 2021, meaning plan numbers are still below the levels seen pre-pandemic.
Total equity released in the first nine months of 2021 stood at £2.989 billion. This is just short of the £3.4 billion released in total in both 2020 and 2019.
During the third quarter of this year customers released as average of £101,593 — a 23 per cent increase on the average amount released in Q3 2020. Key says this higher figure shows customers were using these funds for “big ticket” items, such as gifting and debt management.
Key’s research shows that almost three quarters of the money released (73 per cent) was used for these two reasons. Around £558m of the money release was used to clear debts. A total of 42 per cent of the cash given to family and friends was used for house deposits, while 36 per cent was given as an early inheritance.
The average customer is 70 years old, with almost half of those (49 per cent) taking out an equity release plan in the 65 to 74 years age bracket.
The data also shows that around 75 per cent of customers took out drawdown plans in this third quarter, with the average initial advance standing at £57,183, giving customers the ability to draw a further £301.5 million.
There has also been an increase in the number of equity release customers remortgaging. Key estimates that by the end of September the market transacted 3,000 cases with customers on average moving borrowing of £134,597 from a rate of 5.1 per cent to 3.6 per cent
Key chief executive Will Hale says: “Against the backdrop of a pandemic, the equity release market is on track to break the £4 billion barrier and potentially even touch £4.5 billion by the end of the year.
“This year we’ve seen increasing numbers of people using equity release to support families, manage their current borrowing and use the historically low rates to remortgage their existing equity release plans.”
Equity Release Council Jim Boyd says: “Equity release products may be designed for later life, but these figures show the benefits of accessing property wealth are routinely shared across the generations and increasingly woven into the country’s social fabric.
“A significant amount of funds continue to pass directly to family members and other beneficiaries, making equity release a multi-generational financial planning tool. The ability to ‘recycle’ housing wealth is transformative for many families when it comes to younger generations’ ambitions to progress in life.”
Regional figures from Key shows that most regions of the UK saw the value of property wealth released increase. However there were slight falls in Scotland and the South East.
Northern Ireland lead the way with the value of property wealth released more than trebling while Wales and East Anglia saw growth of 74.7 per cent and 61.6 per cent respectively while all other regions saw double figure rises.
