Recent figures from Key show that the equity release industry is expected to reach a total value of £6 billion in 2019. This is an increase for the 6th consecutive year, up from £3.6 billion in 2018 and £3.01 billion in 2017.
According to research by the Equity Release Council, drawdown plans remain the biggest sellers. This is where you draw down some money initially and then continue to draw down as and when you need it, only paying interest on what you use.
In 2018, drawdown plans accounted for over 64% of all sales, which includes 15% in enhanced drawdown, which provides enhanced terms to homeowners who may have lifestyle or health conditions. Last year, people released £1.46 billion in funds using these products.
Another popular equity release option was lump sum lifetime mortgages, which made up 36% of sales, and also included enhanced plans making up 13% of this total.
In total, the average customer took out around £65,000 to £80,000 through an equity release product and around 37,000 schemes were successfully completed, on average of £10 million per day.
Whilst the most popular age group for taking out a lifetime mortgage is 70-74 (29%) the number of people aged 55 to 69 has increased to 42% in 2018 from 36% the year before.
Consistent growth in recent years has been attributed to a number of different reasons. The product has become a lot more mainstream in recent years, with improved market education facilitated through the news and TV advertising.
Furthermore, the industry has become more competitive with more providers and brokers offering equity release mortgages. Recent reports show that there are over 139 types of equity release products available, offering different variations to assist customers, whether it is through lump sum schemes, drawdowns, home reversions and more.
The chairman of the Equity Release Council, David Burrowes, has said in statement that equity release products are now being frequently used to serve an important social purposes. More and more people are turning to releasing equity in their property in order to support their financial goals. The main reasons for doing this includes the following:
More homeowners across the country are using an equity release mortgage to help family members. This includes helping to fund increasingly expensive university fees, as well as being used for things like weddings and house deposits. In fact, last year the number of equity release customers who were using the money to help family members increased, increasing from 24% in 2017 to 27% in 2018.
The most popular reason why people used equity release products last year was to help finance home and garden improvements. In a report conducted by the independent equity release adviser Key, over 64% surveyed said they had used the cash to re-invest either all or at least some of it into their properties. In a number of cases, this was to age-proof the property, as a growing proportion of people are looking to avoid care homes and remain in their homes in older ages. This included adding things like stair-lifts, ramps and easily accessible washroom facilities.
Another cited reason for equity release was using the money in order to clear debts or existing mortgage. In the report, 31% stated they had released equity in their home to clear credit cards or outstanding loans, whilst 22% used the money in order to pay off an existing mortgage.