Equity release rates fall to record low: ERC

Product choice increased by 42% in 2019 and the figure has almost quadrupled over the last two years from just 86 products available in January 2018.

The data shows that two out of five products now have rates lower than 4% and a growing number of products offer interest-serviced options, partial repayment flexibilities and downsizing protection.

£1.81bn was unlocked in H2 2019, resulting in £3.92bn of property wealth being withdrawn in 2019 as a whole - an annual fall of 3%. However the Council says this area of activity "fared better against the uncertain economic backdrop than the first-time buyer, remortgage and homemover markets, which saw activity reduce by between 5-7% year-on-year".

David Burrowes, chairman of the Equity Release Council, said: “Hopes that the UK would leave behind the political and economic uncertainty of 2019 have been rapidly overtaken in recent weeks by the national and global response to the coronavirus outbreak. Reflecting on 2019, the equity release market remained robust, as for a second year running older homeowners unlocked nearly £4bn of property wealth.

"While uncertainty becomes the norm, property wealth will inevitably continue to play a role over the months and years to come, to help meet the wide-ranging needs of the UK’s ageing population. The increasing diversity of firms in the market reflects the wide range of consumer needs which property wealth is helping to address. It is also a sign of the greater frequency with which the option of releasing equity is coming up in retirement planning conversations."

Claire Singleton, CEO of Legal & General Home Finance, commented: “While the economic outlook remains uncertain, one thing can be assured – for many people in later life, property wealth is still one of their greatest assets. For households assessing their financial needs, as we know many will be during this concerning time, releasing equity from their home may be an option they are already considering. Even prior to the impact of the Covid-19 pandemic, it was clear from the January figures released by the Equity Release Council today, that people were turning to their homes to bolster their finances.

“At Legal & General we are, and always have been, acutely aware of the impact that these products can have on our customers’ lives and have always sought to protect them from unnecessary and needless risk. This is even more important than ever in light of the additional pressure placed on people by the national emergency. As an industry, we are likely to see an increase in demand and so we must make sure we are giving people appropriate guidance, tailored to the current climate, so that they are making measured decisions that meet their long-term needs and aren’t just a reaction to current concerns. At Legal & General, we recognise the critical role of advisers in this as well, and we are supporting them too with our new webinar series and range of marketing tools and content.”

Alice Watson, head of marketing at Canada Life, added: “Despite some of the challenges the sector is facing today as a result of coronavirus, it’s welcome news to see the later life lending sector end 2019 on a high. Increasingly flexible solutions, combined with competitive rates are giving the over-55s the opportunity to tap into their property wealth in a number of ways. This includes guaranteeing inheritance to leave to loved ones, accessing a cash reserve facility or even making penalty free repayments.

“It’s encouraging to see that customers are increasingly aware of how the equity stored in their homes can help them enjoy the retirement they’ve worked long and hard for, whether that be to supplement retirement income, make home improvements or even support family members. As more advisers enter into the later life space, we expect to see equity release play a bigger role as part of a blended retirement plan. Ultimately, it’s our responsibility as an industry to continue working together to provide innovative solutions to meet the needs of today’s retirees.”