Posts with tag: equity release

Equity release growth remains almost unchanged but saw healthy growth in Q4

Published On: February 4, 2020 at 9:30 am

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The latest housing market figures have been published by the Equity Release Council, showing Q4 of 2019 was the second busiest quarter on record.

Last year there was a total of £3.92 billion of housing equity withdrawn by older homeowners. This is only slightly down from 2018 (£3.94 billion), leaving it largely unchanged.

David Burrowes, chairman of the Equity Release Council, commented: “After a period of steady growth, the market has reached a point of consolidation in 2019 with lending volumes in line with 2018. 

“The sector enters 2020 in a strong position with updated standards and a greater number of diverse members signed up than ever before. Looking ahead, we’ll continue to work with stakeholders to ensure consumers are able to access the best advice while ensuring joined-up financial planning so that equity release remains a key consideration in mainstream retirement planning.

“Previously viewed as a niche product to support people’s retirement plans, the untapped potential of equity release is now being recognised. This comes as a growing number of customers are recognising the important role property wealth can play in meeting their retirement needs. 

“This has been driven by competition, falling interest rates, increasing numbers of flexible and innovative product options and supported by rigorous standards in the market.”

Will Hale, CEO at Key, said: “The equity release market is well positioned for a return to growth after last year’s political and economic uncertainty had an impact on confidence with consumers understandably cautious about making long-term decisions on how to use their housing equity to support their wants and needs in later life.

“Despite the uncertainty, The Equity Release Council’s data shows the last three months of 2019 were one of the busiest on record with more than £1 billion in property wealth unlocked. This demonstrates that the fundamental growth drivers of this market remain intact and that there is strong demand from older homeowners for information and advice on how to make the best use of property wealth.

“People retiring in 2020 own total property wealth of £142 billion with the average home among this group worth £388,900. Set alongside this the continued challenges with savings into pensions and there is a growing recognition of the need for lending solutions which can help boost income in retirement while also addressing wider societal issues such as helping the younger generation on to the property ladder and funding social care at home.

“Continuing innovation by equity release lenders means there are now more than 300 products available and the combination of historically low rates as well as flexible features such as the ability to service interest or repay capital demonstrates that the market is developing rapidly and is suited to help a wider range of customers.”

Steve Wilkie, Managing Director of Responsible Life, comments: “The lifetime mortgage market has grown impressively in the past decade, but most importantly it is offering customers more flexibility than ever before.

“While 2019 remained broadly consistent with the previous year, the number of returning drawdown customers grew by 11%, underlining how innovation in the market is providing retirees with the ability to have more control over their money.

“It is encouraging to see this increasing interest in drawdown, as it means people are proactively avoiding big windfalls which can be difficult to manage. 

“The lifetime mortgage has become a mainstream option for later-life financial planning because of intense competition in the past decade which has fuelled rapid product growth and record-low rates.

“This year will likely see a more joined-up approach taken to how customers receive advice, and further policy work throughout 2020 will ensure the industry is enhancing the customer experience every step of the way.” 

Busiest quarter of 2019 to date for equity release market, according to latest report

Published On: October 30, 2019 at 10:47 am

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The latest report from the Equity Release Council reveals an 8% rise in Q3 of 2019 as older homeowners unlock nearly £11m of property wealth a day.

The highlights of the report include:

  • Equity release products have provided £988m of funding to homeowners over the age of 55 during Q3. This is up by 8% from £911m in Q2.
  • 33,000 new customers have used property wealth to support their finances so far this year, with support from regulated financial and independent legal advice.

David Burrowes, Chairman of the Equity Release Council, said: “As a nation with an aging population and a growing need to support longer lives, it is important not to overlook property wealth in modern retirement planning conversations. 

“Today’s equity release market is offering new solutions to fund later life, by combining rigorous consumer protections with more product choices and flexibility to help people meet their financial needs and goals.

“The result of buying property and making mortgage payments during their working lives is that bricks and mortar become many people’s single biggest financial asset when they reach later life. Industry, regulators and government must continue to promote and encourage lifelong savings habits and support consumers to take a joined-up approach to later life planning. 

“One that takes a holistic view about consumer choices, needs and outcomes and considers all wealth and assets into account.”

equity release market

Will Hale, CEO of equity release advisory firm Key, comments: “Today’s figures highlight the resilience of the equity release market in tough economic conditions and how the fundamental issues of low pension savings, substantial property wealth and an aging population continue to drive customer demand and attract new sources of funding to the market helping support product innovation.

Economic and political uncertainty has meant growth has been more subdued in 2019 when compared to 2018 with many customers adopting a wait and see approach. However, with this uncertainty dragging on for longer than anticipated we are starting to see more customers come off the fence. 

“New products, rates at historic lows and the launch of free advice propositions, means that there has never been a better time for customers to consider how their property wealth could unlock a better retirement.

“Looking to the future, the fundamental drivers of the market remain strong with over-55s predicted to make up a third of the population within the next 20 years.  That points to further evolution of the market to meet the needs of an ever more diverse range of customers.

“As such, we see equity release sitting within a broader later life lending sector which needs to continue to adapt across both advice provision and product design to enable people to use their property wealth to support themselves and help families.

“Specialist advice remains vital as older homeowners will always need expert support when making significant financial decisions around how to use their property wealth in the best and most appropriate way.”

Steve Wilkie, managing director of Responsible Life, comments: “Customers have reaped the rewards from intense interest rate competition in the lifetime mortgage market and this, in turn, has bolstered a boom in activity in the past quarter.

“Taking out a lifetime mortgage has long been a serious consideration for many retirees who want their property to work for them and deliver money for home improvements and adaptations, or ‘living inheritance’ for their family, but products are now more attractive and competitive than ever before.

“Strong competition in interest rates have been sparked by a record number of sales in the bulk annuity sector, an industry that secures predictable, low-risk returns to fund retirement income by investing in lifetime mortgages. 

“Customers are the beneficiaries, as they can enjoy all-time-low rates along with growing product numbers which makes it even easier for them to find a deal perfectly suited for their needs.” 

Over-55s Also Being Hit by the Struggles of the Housing Crisis

Published On: September 15, 2016 at 9:14 am

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We’re used to hearing about how aspiring first time buyers are finding it difficult to get onto the property ladder, but did you know that over-55s are also being hit by the struggles caused by the housing crisis?

The latest research by online estate agent eMoov.co.uk has found that those in the later stages of life are also struggling to get buy in current conditions, forcing many to draw equity from their property in order to survive.

Over-55s Also Being Hit by the Struggles of the Housing Crisis

Over-55s Also Being Hit by the Struggles of the Housing Crisis

The agent found that there has been a sharp rise in the number of people aged 55 and over drawing on the equity from their property in order to get by. Around £17 billion of funding has been provided to 350,000 homeowners since 1991 – a third of which was released in the last five years alone.

Equity release plans are long-term agreements based on indefinite terms that usually last until the customer either moves into care or passes away. There is no payment required or interest due on the amount paid out until this point, and an equity release provides better long-term security than a residential mortgage.

During the second half of 2015, the Equity Release Council found that UK homeowners aged 55+ released housing wealth worth a total of 898m – the greatest amount of any half-year on record.

The data also shows a significant increase in those aged 85 and over taking out equity release, accounting for 5.9% of all customers – almost double that in 2014.

The research suggests that for many, the cost of living, alongside the repayment of their mortgage, means that private and state pensions are often inadequate.

Additionally, equity release provides a source of income to fund this, as well as home care and other costs incurred during retirement.

Depending on whether they opt for a drawdown release or a lump sum, equity release customers across the UK are able to boost their finances by between 109-179 weeks’ full-time take home pay, taking an average of £49,607 in equity through a first drawdown withdrawal, or as much as an average of £81,324 in one lump sum.

Unsurprisingly, the figure is highest in London, where the average lump sum increases to £209,739, down to £102,184 in the South East and £78,531 in the South West. The lowest amount on offer across the UK is in Scotland, where the average lump sum is just £39,384.

The founder and CEO of eMoov, Russell Quirk, comments on the findings: “There has been a dramatic increase in the number of over-55s, particularly those 85 and above, having to draw equity from their property in order to survive, due to the ever inflating cost of living in the UK.

“Although record low interest rates are good news for those struggling to get on one end of the ladder, it’s not the case for those at the other end who have seen the interest accrued on their life savings dwindle with the cut in rates.

“With savings rates ever lower, it’s evident that income from pensioners’ savings is under pressure, and therefore, necessitating that grey equity within such housing is being increasingly turned to in order to make ends meet.”

Equity Release Levels at Record High Among Over-55s

Published On: January 26, 2016 at 3:56 pm

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A record level of property wealth was released by homeowners aged 55 and over last year, with £1.61 billion unlocked through specialist equity release plans.

The Equity Release Council (ERC) reports that lending grew by 16% on the previous year, as homeowners used lifetime mortgages and reversion plans to withdraw cash from their homes.

Over 22,500 deals were agreed for 2015 – the highest figure since 2008. The value of borrowing also exceeds its pre-recession high by a third.

Equity Release Levels at Record High Among Over-55s

Equity Release Levels at Record High Among Over-55s

Lifetime mortgages, which allow borrowers to take out a loan against a property and only pay interest on its sale, were the most popular form of borrowing. Meanwhile, reversion plans, which allow homeowners to sell part of their property but continue living there, accounting for less than 1% of deals agreed.

The data shows that for many retirees, property is their biggest asset. Additionally, as house prices have continued rising, they have built up considerable equity. The ERC reports that customers borrowed an average of £70,670.

The Chairman of the ERC, Nigel Waterson, says the figures are “the latest sign of growing reliance on housing wealth as a key pillar of later-life financial planning”.

He continues: “Housing wealth is often people’s greatest asset and it makes sense for equity release to be on every homeowner’s checklist to consider as part of their retirement and estate planning. At the same time, it is not suitable for every circumstance, which is why professional financial advice and independent legal advice are essential.”1

An equity release expert at retirement advisers Age Partnership, Simon Chalk, says the 9.5% increase in property prices over 2015 has made people’s homes “potentially their greatest asset”.

He adds: “During the year, more over-55s benefitted from their increased housing wealth than before, as annual equity release lending reached a new high.

“The strong growth in the market is set to continue in 2016, as house prices see no sign of slowing down and people become more aware of the importance of their housing wealth.”1

Traditionally, equity release plans are controversial, with the original products allowing homeowners to end up owing more than they released from their property.

Current plans protect against negative equity, but they are still not always the best option for homeowners, as they offer less cash than would be available if the property was sold on the open market, and have other financial implications.

The Head of Retirement at Saga, Alex Edmans, comments on the findings: “These latest figures suggest people like being able to unlock cash from their home as and when they need it. This can be a smart move financially, as people only have to pay interest on the funds they release, but they know they can unlock more cash at a later date if they need to.

“However, equity release is not right for everyone. We always recommend getting thorough advice before taking out a plan, as well as speaking to family and friends so they know what you are thinking of doing.”1

1 http://www.theguardian.com/money/2016/jan/25/equity-release-levels-record-high-2015-over-55s

Property equity release up by 17%

Published On: July 15, 2015 at 10:49 am

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The equity release market is continuing to expand, according to a new report.

Figures from research conducted by over 55’s finance specialist Key Retirement shows retired British homeowners decided to cash in in excess of £750m in property wealth during the opening six months of 2015.

Increases

Data from the report shows the average amount of equity released was £68,500, an increase of £3,500 on the same period last year. In total, £753m was released, which represented a rise of 17%. Key Retirement believes that this is an indication of pensioners’ confidence in utilising property wealth when planning their retirement.[1]

A further investigation in the data released shows that there is a large regional variance in equity release totals. For example, average releases in the North West were over £53,000, rising to over £142,000 in London.[1]

Eight of the twelve regions in England saw an increase in the value of property wealth released. The most considerable rise was in the North East with 50%. The South East came next with a 35% rise, followed by London with 30%.[1]

Improvements

Equity being released to retired homeowners is being used to improve standards of living during later life. 58% of customers used all or the majority of their cash to make improvements to their home or garden, with 28% using property wealth to pay for a holiday. 25% of retired homeowners’ property wealth was passed on to family and friends.[1]

Mortgage debt however is proving to be a concern, with 23% of customers paying off some or all of their home loans with their released equity, compared to 20% in the same period in 2014.29% of customers used the money to pay off credit cards.[1]

Property equity release up by 17%

Property equity release up by 17%

Older

In addition, Key Retirement’s research shows that equity release customers are getting older, with the average age rising from 69 to 71 in 2015.[1]

‘Property wealth is making a massive contribution to retirement planning and the equity release market is growing rapidly in response with double digit growth,’ commented Dean Mirfin, technical director at Key Retirement. ‘The average released at £68,5000 are more than 50% bigger than the average pension pot and are also tax-free highlighting the advantages of using property wealth in retirement.’[1]

Mirfin went on to say, ‘cuts in pension allowances and contribution levels plus the review of pension tax treatment underlines that property investments are major assets which should be considered as part of anyone’s retirement planning.’[1]

[1] http://www.propertywire.com/news/europe/uk-home-owners-equity-2015071510748.html