As much as £1.47bn worth of property wealth was released by older homeowners in Britain in the first half of 2020 – but that was thanks largely to a “buoyant” Q1 before the impact of the coronavirus and its resulting political and economic uncertainty hit the market in Q2.
That is the findings of major analysis of the equity release market by Key.
The specialist adviser’s new look Market Monitor paints a “very different picture” between Q1 and Q2, a Key spokesman said – but he added that a downward trajectory was not inevitable.
|UK equity release|
volumes and plans
|H1 2019||H1 2020||Q1 2020||Q2 2020|
|No of customers||22,126||19,869||11,495||8,374|
|Value of new plans||£1.68bn||£1.47bn||£949m||£521m|
|Total value of plans||£2.4bn||£2.1bn||£1.32bn||£767m|
Between Q1 2020 (11,495) and Q2 2020 (8,374), the market saw a 27% fall in the number of customers using equity release and a 45% fall in the amount of new equity released (£949m to £521m).
The total value of plans including reserved drawdown fell from £1.32bn (Q1 2020) to £767m (Q2 2020) over the same period.
But the Key spokesman said that while some of this may be due to customers being “more cautious”, demand has remained “strong”.
That suggests the market may even see a bounce back in Q3, he added.
Low volumes in Q2 impacted on H1 figures with the number of plans taken out falling 10% to 19,870 from the same time last year (H1 2019: 22,216) while total property wealth value released fell 12.6% to £1.47bn from £1.68bn.
The total market including unused drawdown facilities was worth £2.04bn in the six months compared with £2.38bn with the value of reserved drawdown falling to £624m from £706m.
Will Hale, CEO at Key, added that the “unprecedented circumstances” the UK and the world finds itself in due to the coronavirus pandemic was reflected in the “significant slowdown” in the equity release market in Q2.
He said: “While the sector has been remarkably resilient in adjusting working practices in the face of lockdown to ensure we can continue to help customers, there are a number of knock on effects from the current pandemic.
“Indeed, not only are cases taking longer to complete but it is only appropriate that people are delaying their decision to access their housing equity due to the current uncertainty.”
Hale said that Key has “certainly been having these types of conversations” with customers and is “really focused” on helping people decide whether they have an immediate need or perhaps can wait until life returns to normal.
But he added: “That said, demand has remained strong as more customers look at explore how housing equity could help them support them in later life and, as we move to more normal trading conditions, we are confident that these macro drivers will ensure that we will return to growth by year end and into 2021.”