The number of borrowers releasing equity from their homes increased in the first quarter of this year, but the sums that they borrowed were lower, according to a market monitor by Key.
Sales of equity release plans rose by 6 per cent from 11,190 in Q1 2019 to 11,881 in the first three months of 2020,
However, the total amount withdrawn dropped by 3.8 per cent over the same period from £840m to £805m.
An increase in the number of borrowers opting for drawdown, from 66 per cent to 72 per cent of all plans sold, partly explains the reduction in total equity release borrowing.
The findings show that 37 per cent of all equity released is used to repay debt, 21 per cent is used for gifting, 17 per cent for age proofing customers’ homes or gardens and just 8 per cent for holidays.
Those who choose equity release as an option to either repay an outstanding mortgage have a balance of £51,000 on average that they need to clear.
Nearly half of all the property wealth released in the three months came from the South East and London.
Key chief executive Will Hale says: “Following a year of political and economic uncertainty the equity release market started well in 2020 and has proved remarkably resilient given the unprecedented circumstances the UK and the world finds itself in.
“Consumers are more cautious and while we are finding an increased number of people using equity release, they are taking out less and using more drawdown products to help future proof their later life finances whilst mitigating the impact of roll-up interest.
“Our new analysis of the driving force behind equity release decisions suggest that this is a multi-use product driven often by need rather than aspiration with substantially more of the proceeds being spent on debt repayment and helping family members than holidays.
“While in an ideal world, everyone would enter retirement debt free, equity release provides those who are not that lucky with real options – supported by a robust specialist advice process that is designed to help people make the right choices for their individual circumstances.”
