Recent years have seen equity release borrowing thrive – a trend that is unlikely to slow down.  The growing popularity in this area, particularly vis-à-vis ‘later life mortgages’, is down to a plethora of reasons.  These include people living longer, earning later into life, exorbitant fees to fund later life care, low interest rates, pension top ups and helping loved ones get on to the property ladder.

According to figures produced by the Equity Release Council, Q1 2020 saw £1.06bn of property wealth being accessed this way – up 14per cent from 2019!  Though, we are yet to witness the full impact of the Covid-19 crisis on the sector, we do expect continued growth – after, all, the reasons for the demand in this area have not changed; rather these have been exacerbated by the pandemic.

The idea that insufficient pension pots have meant that people are working later in life is nothing new. The first quarter of this year saw a 15.2 per cent drop in the average pension fund and according to research from Legal & General, 1.5 million workers over-50 plan to delay retirement due to financial difficulties and uncertainties brought on by the pandemic.  In light of these figures, we expect an upsurge in equity release to help top up these pensions and allow individuals to retire when they want.

Another important aspect fuelling the equity release market is the Bank of ‘Mum and Dad’.  Without family help, it is near impossible for first-time buyers to get on to the property ladder. In fact, BOMAD is an almost top ten lender itself. Mortgage affordability is tightening due to fewer higher LTV products being available. This has a knock-on effect, meaning that FTBs are joining the property market later in life. Equity release will no doubt provide an opportunity for family to directly help.  With less need to leave properties in wills today as life expectancy soars. Many are looking to tap into wills early to help first time buyers climb that first echelon.

The three traditional stages of life – grow up, work, grow old – no longer seem to apply. Mortgages are adapting alongside other financial products. These are opening up later life finances and giving breathing space to retirees who may be looking to release some cash tied in assets, while also helping the other end of the property market. People feel more comfortable to manage their own portfolio of financial assets since the pensions revolution which is surely helping the trend too.

We wait with bated breath to see how the economic fallout from Covid-19 will hit. We can only hope that equity release continues to thrive because this is one of the very few sectors of lending that can have a tremendous impact on the rest of the mortgage market.

We anticipate that equity release will continue to be used to support FTBs as well as topping up gaps in pensions, paying for holidays, home renovations and lifestyle changes. This can only be positive for the market and economy. Unlocking capital here will stimulate most sectors while at the same time help fund both ends of the property spectrum.

Phil Bailey, sales director, Twenty7Tec