What do the latest equity release statistics tell you about these products?

The Equity Release Council¹ has released the Q2 2023 statistics, and the results show slight increases in borrowing activity.

Does this mean equity release is back to its record-breaking former self circa 2022?

At EveryInvestor, our team thrives on providing the latest equity release news and information to help you on your journey toward financial security in retirement. 

Take a look at these vital statistics:

Why Equity Release Matters for UK Homeowners in 2024

Equity release offers UK homeowners a means to access their property’s value in retirement, providing financial flexibility without needing to sell.

What Is Equity Release and Why Is It Important for UK Homeowners?

For homeowners aged 55 and above, releasing equity is a financial strategy to access the value of their homes while still living there.

It’s a practical way to turn a portion of your home’s equity into usable funds, either as a lump sum or regular income.

Each type, be it a lifetime mortgage or a home reversion plan, offers unique benefits.

They can be tailored to specific goals, like funding long-term care, travel, or even assisting with intergenerational wealth transfer.

Equity release tax-free: While the released funds are generally tax-free, there might be indirect tax implications, such as affecting means-tested benefits or inheritance tax planning. It’s essential to seek professional advice.

But, is equity release a good option? Let’s see what the figures say…

The Pros and Cons of Equity Release in the UK

Equity release in the UK allows homeowners aged 55 and over to access the wealth tied up in their property without the need to sell or move out.

Advantages include providing a lump sum or regular income to supplement pensions, covering living expenses, or funding home improvements.

It offers financial flexibility in retirement, with no monthly repayments required for lifetime mortgages, the most common form of equity release.

However, the disadvantages are significant; the interest compounds over time, reducing the estate’s value for heirs and potentially affecting eligibility for means-tested benefits.

Moreover, it might limit the homeowner’s ability to move or downsize due to early repayment charges.

How Does Equity Release Affect Your Financial Planning for Retirement?

Equity release can significantly alter retirement planning by providing additional funds, but it may impact inheritance and benefit eligibility.

Equity Release vs. Other Retirement Funding Options: Which Is Best for UK Retirees?

Choosing between equity release and other retirement funding options depends on individual circumstances, including financial needs, estate planning goals, and homeownership status.

Equity release provides a way to tap into home equity without moving, suitable for those with significant property wealth but limited cash flow.

Conversely, options like downsizing release funds with potentially lower costs and preserving more estate value for inheritance.

Pension drawdowns and annuities offer income from retirement savings, with varying degrees of flexibility and security.

Professional financial advice is crucial in navigating these options to find the best fit for retirement goals.

How Does Equity Release Impact Inheritance Planning for UK Homeowners?

Equity release impacts inheritance planning by potentially reducing the value of the estate passed on to heirs.

As the loan amount plus interest is repaid from the estate upon the homeowner’s death or move into long-term care, less wealth may be available for inheritance.

This necessitates careful consideration and planning, often involving family discussions and legal advice to ensure all parties understand the implications.

Some equity release schemes offer an inheritance protection guarantee, allowing homeowners to ring-fence a portion of their property’s value for their heirs.

What Are the Current Trends and Statistics in the UK Equity Release Market?

Recent trends show a growing interest in equity release, with increasing numbers of UK homeowners leveraging their property equity amidst rising market statistics.

What Are the Latest UK Equity Release Market Statistics?

Equity release in the UK has seen a significant surge recently.

According to the Equity Release Council‘s Spring 2021 report, a total of £3.89bn was lent to homeowners aged 55 and over in 2020.

Additionally, new customers opting for this financial scheme rose by 10% compared to 2019, with 76,154 new plans agreed upon, highlighting the growing popularity of equity release.

Interestingly, the data unveils specific trends within the equity release market.

Drawdown lifetime mortgages, the most popular plan type, accounted for 64% of new agreements in 2020.

In contrast, lump-sum lifetime mortgages and home reversion plans made up 36% and less than 1% respectively.

These statistics underline consumer preference for flexibility in accessing property wealth, a vital understanding for those navigating the equity release landscape.

Evaluating the safety of equity release involves assessing various factors, including market conditions, interest rates, and potential impacts on inheritance, to determine if it aligns with one’s financial goals.

Latest Equity Release Council Statistics: How Did Q2 2023 Perform?

Equity Release Council statistics in Q2 of 2023² show a continued drop in product activity as a response to the increased interest rates resulting from the mini-budget.

However, statistics started to increase towards the end of the quarter.

It is important to note that increased rates are seen across mortgage products, with the gap narrowing between traditional and lifetime mortgage rates over the past year.

How Many New Equity Release Plans Emerged in Q2 2023?

6,682 new equity release plans were taken out between April and June 2023.

This figure is similar to the previous month’s 6,766 but down by 1%. 

Has There Been an Increase in New Equity Release Plans in 2023?

The number of new plans taken out has decreased this year, likely due to the interest rates increase.

Year-on-year, there was a 46% drop, with 12,485 new customers choosing equity release in Q2 2022.

11,174 new plans were agreed to in Q4 2022, with a 17% drop from the previous quarter.³

Of course, this is a 39% drop when compared to the previous month.

Equity Release Market Trends: Increase or Decrease in Quarterly Lending?

There has been a decrease in total quarterly lending of 5%, with the total amount borrowed sitting at £664mln.

With equity release on the rise until recently, this is the slowest quarter since Q3 2016.

Which Type of Lifetime Mortgage Dominated the Market in Q2 2023?

The type of lifetime mortgage that was the most popular was the drawdown lifetime mortgage, as it increased in popularity over the past year.

52% of customers chose a drawdown lifetime mortgage, with 48% selecting a lump sum.

Is the Equity Release Market Showing Signs of Growth in 2023?

Unfortunately, the market has not returned to growth, but it is still active.

With the cost of living crisis⁴ still a reality in the UK, homeowners will still utilise products like equity release to supplement income in later life. 

Which Month in Q2 2023 Had the Highest Equity Release Activity?

The month that showed the best results was June 2023 at 2,462.

However:

The Council’s SEO said it is too early to know if this is the start of a rise in product activity.

Number of Returning Customers for Equity Release in Q2 2023: A Look at the Stats

There were 2,529 returning customers in Q2 2023, which is more than the previous quarter.

There was a 15% growth quarter-on-quarter, with 2,193 customers returning in the first part of the year.

What Was the Average Equity Released by Returning Customers in 2023?

The average released by returning drawdown customers was £12,468, which is 7% less than the previous quarter.

It is believed that homeowners are withdrawing less equity as they cautiously navigate high-interest rates.⁵

Latest Product Standards from the Equity Release Council: What’s New in 2023?

The Equity Release Council’s newest equity release product standard is that all new lifetime mortgages must give customers the option to repay monthly interest and a portion of the loan, penalty-free.

Historical Equity Release Statistics: A Comprehensive Overview

Past statistics show that equity release has recently been on a downward trend, but it rose significantly in the past two years. 

A summary of the past few quarters:

Q1 2023

In Q1 of 2023, customer activity rose slightly, which could potentially mean that equity release is again on the rise, but it is too early to tell.

Q4 2022

During Q4 of 2022, market activity dipped following September’s mini-budget rate increases.

Q3 2022

In Q3 2022, a new record is reached as an 8% increase in new equity release plans taken out by homeowners aged 55+, resulting in over 13,000 new customers for the quarter.⁶

Q2 2022

Just before Q2 of 2022, the Council launches it’s fifth product standard on 28th March, allowing customers to make penalty-free partial repayments if they can afford it.⁷

Q1 2022

In Q1 of 2022, equity release showed a rise in popularity thanks to more people considering equity release, with total quarterly lending exceeding £1.5bln.⁸

Q4 2021

During Q4 of 2021, the property wealth sector returned to growth for the first time since 2018 thanks to over 76,000 customers using equity release products.⁹

Q3 2021

In Q3 2021, customers had already accessed nearly £3.5bln in the year, vastly outperforming the previous year.¹⁰

Q2 2021

During Q2 of 2021, Over 20,000 new and existing customers accessed property wealth in the UK.¹¹

Q1 2021

In the first quarter of 2021, £1.4bln in equity was released by new and existing UK-based equity release customers.¹²

Q4 2020

In Q4 of 2020, 11,566 new equity release plans were unlocked and the total cash released in 2020 was £3.89bln.¹³

Q3 2020

In Q3 2020, Equity release activity began to recover towards pre-Covid levels with a 41% increase in new plans agreed.¹⁴

Q2 2020

With Covid lockdown conditions during Q2 of 2020, there was a steep drop in the equity release market as activity fell by one-third.¹⁵

Q1 2020

Q1’s 2020 Pre-lockdown activity led to over £1bln of equity release products being accessed.¹⁶

How Have Equity Release Products Evolved Over Time?

Equity release products have diversified, offering more flexible solutions like interest-only options, reflecting changing homeowner needs and market demands.

Interest-Only vs. Lifetime Mortgages: What’s the Difference for UK Equity Release?

Interest-only and lifetime mortgages are two primary types of equity release products in the UK.

Interest-only mortgages require the homeowner to make monthly interest payments, preserving the original loan amount, which is repaid when the property is sold, typically after the homeowner’s death or move into long-term care. This option can help maintain the estate’s value for inheritance.

In contrast, lifetime mortgages do not require monthly payments; instead, the interest compounds over time, with the loan plus interest repaid from the estate’s sale.

Lifetime mortgages offer a no-negative-equity guarantee, ensuring that the debt never exceeds the property’s value.

Comparing Equity Release Statistics: Trends and Graphs Across the Years

Take a look at this equity release statistic comparison graph:

What Are the Latest Regulatory Changes Affecting Equity Release in the UK?

The UK’s equity release market is regulated by the Financial Conduct Authority (FCA), which has introduced several changes to protect consumers.

Recent regulatory updates focus on enhancing transparency and ensuring that equity release products are sold responsibly.

These include stricter advice requirements, ensuring advisers discuss the impact of equity release on inheritance and means-tested benefits.

Additionally, there’s an emphasis on product innovation, such as offering more flexible repayment options to reduce the compound interest effect.

These changes aim to safeguard homeowners, ensuring they make informed decisions in their retirement planning.

Frequently Asked Questions About Equity Release in the UK

Concluding Thoughts on Equity Release Statistics and Trends in the UK

The latest Equity Release Council statistics for Q2 2023 reveal a complex picture of the equity release market in the UK. 

Whilst there have been some indications of recovery, the sector has not returned to it’s record-breaking performance of 2022. 

Drawdown lifetime mortgages remain popular, and new standards are emerging to provide more flexibility to customers. 

However, caution appears to be the prevailing sentiment as homeowners navigate high-interest rates. 

The market is undoubtedly one to watch, and these equity release statistics will continue to provide valuable insights into consumer trends and the overall economic landscape in the UK.