How the equity release market has changed in 2020

Key, a provider for equity release advice, discusses the research they found looking at the statistics for equity release in 2020 and how it has been spent

The COVID-19 pandemic has affected almost every facet of modern society, with its impacts felt far beyond the significant human cost wrought by the virus. Businesses across all sectors have been hit hard, with many industries seeing changes that could yet prove to be permanent.

In these uncertain and troubling times, financial security has become a major priority for many – a theme that is reflected in the shifts seen in the equity release market. Like most, it’s a market that has been impacted by the coronavirus, and Key has analysed the data for the UK in 2020 and spotted some emerging trends.

Amount of equity released down by almost half in Q2

Market figures show that 11,495 customers took out an equity release plan in the first three months of 2020, for a combined value of £949 million. However, it was at the end of March that the pandemic really took hold in this country, and the heightened uncertainty appears to have had an effect, as only 8,374 released equity in Q2 – a fall of 27%. Unsurprisingly, the combined value of new plans also saw a significant decline, down 45% to £521m. Will Hale, CEO at Key, explains further:

“The unprecedented circumstances the UK and the world finds itself in due to the coronavirus has been reflected in the significant slowdown in the equity release market in the second quarter. Whilst 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.” 

More customers opting to pay off debt

Meanwhile, those who are releasing equity are using the capital in a slightly different way. The data shows that more than two-fifths (41%) of all equity released in the first half of the year went towards paying off debts. When the pandemic hit, customer habits shifted accordingly.

For example, in Q1, 25% of customers released equity to repay mortgages and 12% to repay debt. However, in the second quarter, those figures rose to 31% and 13% respectively. In contrast, the number of customers using equity for home/garden renovations fell from 17% to 14% while those using it for holidays dropped from 8% to 4%.

“Q1 2020 was very different from Q2 2020 and it is only appropriate that those customers exploring equity release during the time of the pandemic have been focused on shoring up their finances by repaying debt and supporting their wider families rather than looking to spend money on holidays or home and garden improvements,” said Mr Hale. “Even with the changes that the Chancellor recently announced, many older consumers are likely to be extremely cautious about their choices around their spending for the foreseeable future.”

A wider range of options

Encouragingly for prospective customers, there has been a huge surge in the number of equity release products available. Just three years ago, there were 86 plans on the market. By the end of August 2020, there were 525 – an increase of 510%. This year alone has seen 210 new plans launched, which works out at one every 28 hours. And these numbers represent great cause for optimism, as explained by Key’s Business Development Director, Jason Ruse:

“While the equity release market – as with other sectors – has had to work hard to weather the current pandemic, we have still seen significant product innovation and development. Indeed, with more funders than ever active in the market, there is more choice and more competitive interest rates than ever which is great news for customers.”