How do people spend equity release money?
The equity release market in the UK continues to grow, despite the impact of the coronavirus pandemic and resulting economic uncertainty.
According to the latest figures, older homeowners released equity worth £1.47 billion from their homes in the first half of this year.
This release of property wealth was dominated by activity in the first three months of the year, with far fewer equity release cases in the second quarter.
Between the first and second quarters of 2020, there was a 27% fall in the number of new equity release customers, with a 45% fall in the amount of property wealth accessed.
Total new equity release customers fell from 11,495 in the first quarter to 8,374 in the second quarter, according to the latest Market Monitor report from equity release adviser Key.
Homeowners released £949 million of equity from their homes in the first quarter, falling to £521 million in the second quarter of the year.
Despite this fall in activity, demand for equity release has remained high, suggesting there could be a bounce-back in the market during the rest of 2020.
The average loan amount fell slightly in the first half of this year, compared to the same six months last year. Homeowners borrowed an average of £74,014 in the first half of this year, down from £76,064 in the first half of 2019.
The age of a customer using an equity release remained broadly the same, at 70.
Will Hale, CEO at Key, said:
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. At Key, we have certainly been having these types of conversations with customers and really focused on helping people decide whether they have an immediate need or perhaps can wait until society returns to a situation when booking a holiday or age-proofing their home is possible.
That said, demand has remained strong as more customers look at explore how housing equity could help them support them in later life and, as we move to more normal trading conditions, we are confident that these macro drivers will ensure that we will return to growth by year end and into 2021.
Analysis of the equity release market also looked at how money released from the value of property is being used.
In the first half of the year, 59% of people spent some of the equity they released on home or garden renovations but spent only 16% of the equity release proceeds on this reason.
More common was repaying mortgages or gifting money to family.