Record Year for Equity Release as Parents Help Their Children Get on the Property Ladder

At the end of September, data compiled by Key showed the value of equity releases had increased by 18.8%, an incredible £884 million since the third quarter of 2020, indicating that the equity release market is firmly on target for a record year by the end of December.

Equity experts Key has provided figures of just over £1 billion taken out using equity release in the three months running up to the end of September of this year. Although the number of equity release plans actually decreased by 3.2%, figures were up from the same time last year by £884 million (18.8%). Equity release plans fell from 10,671 in the third quarter of 2020 to 10,333 by the close of September 2021 and remain lower than the pre-COVID-19 levels.

Many people have taken advantage of the tied-up equity in their homes with the main aim of paying off debts and giving much-needed financial support to family members, particularly children and grandchildren. The breakdown shows that 42% of those releasing equity for the purpose of helping family members did so for the sole purpose of helping fund a deposit for a home purchase, with 36% giving the money as an early inheritance.

The equity release market has for some time hovered around the £1 billion mark most years, but Key believes 2021 is on course to hit £4 billion by the end of December.

A little over 66% of customers were approved for drawdown plans in the 3 months, with the initial release amount being an average of £57,183 and the ability to draw a further £301.5 million.

The average age of the customer releasing equity, according to the report, is 70 years old, with nearly half falling between the ages of 65 and 74.

Key’s chief executive, Will Hale, said that the notable increase in lending was partly due to a rise in homeowners in their later years opting to move from an ordinary mortgage product to a lifetime mortgage.

“We’ve seen increasing numbers of people using equity release to support families, manage their current borrowing, and use the historically low rates to remortgage their existing equity release plans,” he commented.

“While many plans have been put on hold during the pandemic, we also expect to see the return of people looking to boost discretionary spending as they look again at how to fund their later life ambitions.”

Equity Release Council’s chief executive, Jim Boyd, put forward the suggestion that the data showed “the benefits of accessing property wealth are routinely shared across generations and increasingly woven into the country’s social fabric”.

“Significant funds continue to pass directly to family members and other beneficiaries, making equity release a multigenerational financial planning tool,” he added.

“The ability to ‘recycle’ housing wealth is transformative for many families when it comes to younger generations’ ambitions to progress in life, from buying a home and getting married to continuing in education and starting a business.

“Unlocking property wealth is not the right choice for everyone, and one of the benefits of the equity release advice process is that it can unearth other solutions, from savings or investments to unclaimed pensions or benefit entitlements. With longer lives, people’s needs change over time, and the questions prompted by considering equity release can help identify the best way to use different sources of wealth at different stages of life.”