The majority of the money was used to make their finances more resilient and help families via gifting, the data shows.
An estimated 9,930 people released more than £1.1bn from their properties in Q4 2020.
However, on an annual basis there was 12.5% decrease in plan sales, from 46,247 in 2019 to 40,470 in 2020.
There was also a 4.4% reduction in the amount released, £3.456bn in 2020 from £3,595bn in 2019.
This trend towards using equity release to refinance debt and support their wider families via gifting also saw the average amount released increase by 9.2% from £77,735 in 2019, to £84,919 in 2020.
Despite house prices increasing by 6.43% over the past 12 months, LTVs remained at 26%, up slightly from 2019.
Average interest rates fell to 2.8% in Q4, from 3.15% in Q4 2019.
Drawdown remained the most popular product during the year accounting for 70% of all sales, down from 73% in 2019.
Having risen to 71 years old in 2014, the average customer age has remained consistent, with 72 years in 2019 and 71 years in 2020.
Furthermore, equity release has increasingly been used to help wider families (22%) or refinance mortgage (29%) or unsecured borrowing (18%).
The data shows that a total of £755m was transferred between the generations in 2020.
With the stamp duty holiday coming to an end, 43% of these gifts were earmarked for housing deposits and 26% for an early inheritance.
Just 11% of the property wealth was spent on home improvements and 3% on holidays.
On a regional basis, the South East was the only region to see a rise in the value of new equity released during 2020 with an increase of 1.3% to £1.025bn.
The total value released in the year was unchanged in the South West at nearly £380m.
In contrast, Wales suffered the biggest fall at 25%, and East Anglia experienced a decline of more than 18%.
Plan sales fell in all regions although the decrease was marginal in the North East at nearly 1%.
East Anglia, Wales and London all saw higher than average falls.
The North West was the third-highest selling region in the UK ahead of London, which dropped to fourth.
However, the strength of the housing market in the South East and London meant those regions accounted for nearly half of all equity released during the year despite accounting for only a third of plans sold.
Will Hale, chief executive of Key, said: “While 2020 is down on 2019, the fact that we have only seen a 4.4% drop in the value of equity released suggests that customer demand remains strong supported by the efforts of advisers, lenders and other service providers in this challenging year.
“Discretionary spending has fallen as equity release increasingly looks to support clients’ aspirations to help their families and make their finances as resilient as possible by refinancing debt.
“With the end to the stamp duty holiday on the horizon, it is also not entirely surprising to see that many older homeowners have taken the opportunity to pass wealth down the generations and help children or grandchildren onto the property ladder.
“While this may change as we head in 2021 and the holiday comes to an end, I suspect the desire to help families will remain a strong driver of this market in years to come.
“The national roll-out of vaccinations is providing some optimism but it is still hard to predict when the market will return to more normal trading conditions.
“At the moment, our focus needs to be on finding the right outcome for each customer – encouraging them to think about their long term needs and ambitions.”
