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Equity release market growth slows as economic conditions bite

Average loans have slipped in value by nearly £2,000

The number of equity release plans increased by 5.6% to 22,126 in the first half of 2019, while the total value released edged up by 3% to £1.682bn, according to data from equity release advisory firm Key. 

The figures suggest that while older homeowners released nearly in £9.3m in property wealth a day in the first six months of the year, the sector is reacting to current economic conditions seen across the property market and growth has slowed.

Average loans taken by customers slipped in value by nearly £2,000 to £76,064 compared with the same period a year ago as the market stabilised in the face of continued political and economic uncertainty.

Once potential further advances of £706m on drawdown are taken into account, it suggests the first half recorded total borrowing of £2.38bn, driven by new funders entering the market and historically low interest rates.

Will Hale, chief executive at Key, said while the key market drivers of low pension saving and substantial property wealth remain, the over-55s are taking a cautious approach to accessing the value tied up in bricks and mortar.

“That said, the market is benefiting from the arrival of new sources of funding which is helping to keep rates at historic lows and to drive the launch of various new products,” he added. “Consequently, we have seen an increase in the number of customers remortgaging to benefit from lower rates or the opportunity to release additional equity due to house price rises or the higher LTVs that are now available.”

Key’s Market Monitor, which analyses data reflecting both Equity Release Council members and non-members, found the biggest increase in value released was in Northern Ireland where total value rose by 26% with Wales seeing gains of nearly 23%. 

Regions which recorded slight falls in total value released such as East Anglia, London and the South East all saw an increase in plan sales. Only the East Midlands saw a marginal drop in value released and plan sales.

Wales saw the biggest rise in plan sales at 23% with the West Midlands recording an increase of more than 20%. Other areas seeing double digit sales increases included Northern Ireland, the North West, the North East and Yorkshire & The Humber.

Drawdown plans remained the biggest sellers accounting for nearly three-quarters of all sales (73%) with enhanced drawdown, which offers better terms for people with health or lifestyle conditions, accounting for 22%. Lump sum lifetime mortgages made up 27% of sales, including 10% of enhanced plans.