Record Number Of People Releasing Equity From Their Home

This week’s podcast is all about the latest data coming out from the Equity Release Council. Craig is joined by Equity Release Specialist, Mark Thompson.

What data has the Equity Release Council shared?

A record number of people have taken out an equity release product in the first quarter of this year: 23,000 people. That’s the highest on record. In the previous quarter it was just under 20,000, and in the first quarter of 2021 it was around 16,500.

So there’s been an increase of 6,500 people taking out equities in the first quarter alone, a growth of 34%. So what’s going on in the market?

More products, better quality

Equity release products are getting better, there are more to choose from and they are more customer centric. There are many benefits to the customer that weren’t there a few years ago. We’ve gone from around 200 products to 600 in the space of a year or so.

So is it the fact that the more people take equity release, the more others are happier with it? More and more people see how beneficial and user friendly it is, so perhaps we’ll see an exponential rise as people share their experience.

Using drawdown facilities on a lifetime mortgage

In the first quarter of 2021, just over 5,500 people used the drawdown facility on their lifetime mortgage. In the first quarter of 2022, that went up to 9,450. That’s around a 70% increase.

So, all of a sudden, people that had drawdown facilities started using them. The million dollar question is why – and it’s interesting to look at the details.

That number is still slightly down on where it was a couple of years ago before the pandemic. People haven’t done much in the last two years in terms of using that drawdown facility, because of Covid. But now we can see it start to grow again, and potentially reach record levels quickly, especially as the cost of living rises.

The benefits of accessible funds

It’s great to see that people are using this drawdown facility, because in a way, it shows that the product works. If a client didn’t like their product and wished they hadn’t bought it, they wouldn’t be drawing down any further funds.

Instead, people like to know later in life that they have a facility behind them if things go wrong. If you need some money, you’re not panicking about where to get it. As a mortgage advisor, the number of people I see with high interest rate credit cards and loans is amazing. I see people with 20%,30%, even 40% interest rates.

Instead, at 60, 65 or 70 years old, wouldn’t you prefer to know that you can relax a bit and enjoy the last years of your life?

Setting up a new drawdown facility

You might already have a lifetime mortgage, but it doesn’t have a drawdown facility. But there’s nothing to stop you going back and asking for one. As long as you’ve got more equity in your property, you can probably do it.

It’s not the end of the world if you don’t arrange drawdown at the beginning. A lot of people have it as a ‘nice to have’ option but now, for many, it will be essential.

In lockdown, the number of people taking money from their equity release fell, because none of us needed the money. We didn’t go anywhere, we didn’t spend much. Now, people are starting to spend again.

Benefiting from rising house prices

House prices went up by just over 10% in a year. The latest figures to the end of February show the average UK house price in February 2022 was £277,000. That’s an increase of 27,000 on the year before.

We know that prices can go down as well as up, but in the last two or three years, the growth has been astonishing. And that means money is locked up in people’s properties. So the increase in house prices has given everybody more availability of funds that they can use for any reason. As equity release becomes more popular, more people are realising that they can unlock that money.

The growth will continue

Since we came out of lockdown, businesses have been booming, people are spending money. And now as prices rise, it’s likely that people will use equity release more. We can imagine people realising that the best way to afford a caravan, holiday home or whatever else is by using equity release. It’s almost inevitable.

And that isn’t something that should cause too much concern. The Equity Release Council really is protecting people. It puts forward many standards, protecting us from interest rate rises, for example.

The interest rates with equity release are lifetime rates. There’s no negative equity – you can’t owe more than your property is worth. Servicing the loan isn’t a problem either – you don’t have to pay the loan back, although you can service it and pay some interest off if you choose.

It’s a stress-free situation – we know interest rates are going up, costs are going up, but once you have your lifetime mortgage there are no nasty surprises.

Equity release or a lifetime mortgage is not for everyone. But for some it really is life changing, and that will always be the case.