Second quarter statistics released by the Equity Release Council show that 7,341 new plans were taken out between April and June, a 34 per cent drop on the previous quarter and the lowest number seen since Q2 2016.
The number of total customers served in Q2 2020 also fell from the number seen in Q1, from 21,884 to 13,617, or 38 per cent.
This equates to £698m of property wealth being accessed, the ERC adds, which is almost £400m less than the £1.064bn taken out between January and March of this year.
The makeup of equity release plans for new customers was little changed, despite the dramatic scenario things took place against: lump sum lifetime mortgages made up 45 per cent of new plans in the second quarter compared to 43 per cent in the first quarter, and the average first instalment of drawdown plans was £68,606 in Q2 compared to £68,492 in Q1.
Few returning customers, however, took extra drawdowns – 5,608 in Q2 2020 compared to 9,805 in Q1 – a fall of 43 per cent.
ERC chairman David Burrowes says: “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. 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.
“Property assets have long been one of the nation’s main sources of wealth and are likely to play an increasingly important role to support people when addressing the challenges facing many in later life, including bridging the savings gap for older homeowners who are asset rich but cash poor.
Market participants agree with this hopefully outlook general. Legal & General Home Finance chief executive Claire Singleton says: “As the economic picture becomes clearer I think demand will return. I anticipate some homeowners will look to supplement their income or support family members through gifting. For others, the easing of lockdown will open up opportunities for holidays, weddings and those other ‘big ticket’ events which drive demand.
“Figures earlier in the year, and initial signs of recovery as lockdown eased in June, back this up, showing that the underlying demand is there. In the longer-term, I expect the growing recognition of equity release as a valuable product to continue.”
Canada Life head of marketing, insurance Alice Watson comments: “As we start to see lockdown lift, I’m optimistic for a return to growth. The full impact of coronavirus is still unknown, but the global pandemic has proved that the industry can rise to any challenge.
“Over the last few months alone, the market has demonstrated its resilience by adjusting to new ways of working and embracing technology and I’m confident that the market will continue to pull together to deliver solutions for advisers and their clients.”
