Monday, May 16, 2022
Real EstateUK

£1bln in property wealth released during first quarter

Older homeowners

Total equity released in the Q1 rose by 12.8% to £1.07 billion from £950.59 million in the same period last year

Older homeowners have taken advantage of the rapid escalation of house prices to release more than £11.3m in property wealth a day during the first three months of the year, according to new data from equity release adviser, Key.

According to the figures, the average customer received £103,710 – a 25% rise over the £83,242 released in the first quarter of 2020 – highlighting how over-55s are confidently using their housing equity to support family and ease the pressure on income by managing debt.

Total equity released (including drawdown and further advances) in the three months to March 31st rose by 12.8% to £1.07 billion from £950.59 million in the same period last year despite plan sales dropping by 9.5% to 10,341 from 11,423.

Buoyant house prices no doubt played a role in boosting the amount released as the average LTV only increased 2% on an annual basis (from 25% in Q1 2020 to 27% in Q1 2021). The average price of a house used for equity release also increased 12% to £366,660 from £326,486 last year and was substantially higher than the national average house price of £232,134 in March.

The amount of reserved drawdown and further advances taken dropped by 6% from £146.30 million last year to £137.86 million. The biggest drop was in reserved drawdown which dropped from £123.85 million to £112.39 million.

Around three-quarters of the money was spent on clearing mortgages (34%) and unsecured debts (26%) while continuing to help families with gifting (21%). Fewer people managed mortgage (23%) or unsecured (25%) debt in Q1 2020 with the aid of equity release but even with the Stamp Duty bounce driving the market, there was more gifting (29%) in the first quarter last year.

Unsurprisingly, the amount spent on holidays dropped to just 1% (from 8% in Q1 2020) and only 7% of the equity released used for home improvements (from 17% in Q1 2020) as over-55s focused on essential rather than aspirational spending. That said, while the proportion of customers who spent money on home improvements more than halved from 63% (Q1 2020) to 31% (Q1 2021) some essential renovations to make homes ‘retirement ready’ were undertaken.

Will Hale, CEO at Key, said: The strength of the property market driven by the extension of the Stamp Duty Holiday and the launch of Government guarantees for over 95% LTV mortgages are helping to increase the property wealth that over-55s can use for retirement planning. However, the equity release market is building its own momentum and demonstrating continued resilience as client look to it for support with debt management and gifting.


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