The average interest rate for an equity release product fell from 4.48 per cent at the start of 2020 to 4.11 per cent in July, according to the Equity Release Council’s latest market report.
It says that over half of the 379 products on the market in July (down from 401 in January 2020 and up from 294 in July 2019), over half offered rates of 4 per cent or lower, and a fifth rates below 3 per cent.
Just 3 per cent of available products list an interest rate of 6.01 per cent or over, the ERC says.
The report adds that there was a 14 per cent drop in customer activity in the first half of 2020 compared to H1 2019 alongside a 15 per cent fall in new plans agreed.
This equates to 35,501 customers involved in the equity release market during the first half of this year and 18,420 new plans agreed upon.
“The unprecedented uncertainty of the first six months of 2020 has affected households and businesses alike, with the equity release market no exception. While pent-up demand in Q1 led to a strong first quarter, the impact of Covid-19 and the lockdown dominated Q2 before showing initial signs of recovery in June,” says Equity Release Council chairman David Burrowes.
He adds: “As the UK’s ageing population seeks to fund increasingly longer retirements, property wealth can play a fundamental role for many people, both now and in the future, as part of a more joined-up approach to planning for retirement. The challenges that lie ahead show no signs of easing, so it is important that people are aware of all the options available to them to help fund later life.
Legal & General chief executive Claire Singleton comments: “It is unfortunate that many UK households find themselves in financial difficulty as a result of the pandemic and we know from our research that a significant number of people approaching retirement age are rethinking their plans. Releasing equity from their homes could give some people more options and flexibility to their planning.
“Record low rates and more choice are clearly in the customer’s interest, but given many could be vulnerable due to financial stress, it even more important for them to pause, take advice and avoid reacting hastily to financial concerns. While fantastic progress made by the sector has brought equity release into the mainstream, homeowners should still have an open conversation with their adviser and remember that equity release is a long-term product.”
Just Group communications director Stephen Lowe says: “The structural drivers of growth for the equity release market are strong and will result in people continuing to use home equity to support their later life.
“Equity release is not the only market to have witnessed some short-term volatility in demand as a result of Covid, but its growth is underpinned by long-term financial and demographic trends.”
