According to the Key Equity Release Market Monitor, the number of new plans taken out also slipped by three per cent from 47,081 to 45,598.
The last three months of the year appeared to return to growth with £921m released compared with £887m the quarter before, as well as an increase in plan sales to 11,820 from 11,722. Key suggested this indicated a rise in consumer confidence.
Homeowners released nearly £9.5m of property wealth a day in 2019 but consumer caution and the dominance of drawdown saw the average amount released fall marginally to £75,631 compared with £76,473 in 2018.
The Market Monitor, which analyses data reflecting both Equity Release Council members and non-members, showed Northern Ireland with the biggest rise in value released at 17 per cent year-on-year and in plan sales at nine per cent.
Wales saw value released rise by 10 per cent and plans sales by eight per cent while the West Midlands recorded gains in value released of 11 per cent and plan sales by seven per cent.
The figures will be disappointing for the industry which had seen strong growth over recent years but failed to break the £4bn mark.
In December the FCA confirmed it was reviewing equity release and later life lending in a bid to identify “any potential harms and how these can be reduced”, which was generally welcomed by the industry.
Meanwhile, research conducted by London School of Economics (LSE) for Family Building Society published this week found there was still wariness about the product from older homeowners and concern about sourcing holistic advice.
Drawdown plans accounted for 73 per cent of the market last year, up from 64 per cent in 2018. The total market including unused drawdown facilities was worth £4.9bn in 2019 compared with £5bn previously.
Key suggested an increase in equity release products offering drawdown features had resulted in borrowers leaning towards this option.
Enhanced drawdown – which offers improved terms to customers with health or lifestyle issues – accounted for 20 per cent of equity release sales compared with 27 per cent for lifetime mortgage sales in total.
The numbers of customers switching from existing equity release plans rose to five per cent in 2019 compared with four per cent in the previous year.
Some 29 per cent of equity release customers in 2019 used some or all of the cash to pay off loans or credit cards while 20 per cent used money to clear existing mortgages.
Additionally, 64 per cent of customers used some or all of the cash they released to improve their homes or gardens while 32 per cent funded holidays.
Gifting family continued to be a motivation for equity release as 28 per cent used the money for this purpose.
Growth not realised
Will Hale (pictured), CEO at Key, said last year was a busy year for the sector, with more funders than ever before in the market and more than 300 different plans as well as growing consumer interest.
“That said, we did not see the continued double digit growth that we have seen in recent years as consumers – unsettled by current economic and political events – chose to defer decisions around how housing equity might help them in later life,” he said.
Hale said despite the falls seen in value and volume of equity release taken out, the last two quarters indicated potential continued growth in the market.
“There are more than 24 million over-55s in the UK so market drivers remain strong and as consumer confidence grows, we will increasingly see more people looking to take advantage of the innovative new products and continued low rates,” he added.