The Equity Release Council’s (ECR) Autumn 2022 Market Report reveals that, over the last four years, Wales (40 per cent), the North West (38 per cent) and West Midlands (31 per cent) have seen the biggest increases in the number of older homeowners using equity release products to access money from their homes.
Meanwhile, every region across the Midlands and north of England has seen at least 26 per cent growth in the uptake of lifetime mortgages since 2017.
The trend comes as the ERC’s analysis shows rising house prices have pushed the overall valuation of UK housing to a record £7tr, after annual house price gains hit 12.8 per cent in May.
And despite taking on £100bn extra mortgage debt, property owners, including homeowners and landlords, have gained £46,000 of equity per household since summer 2020, with 77 per cent of the average home owned in cash.
Product watch
The research also explored how equity release loans had been impacted by rising interest rates so far in 2022. The ERC noted that the average product rate rose from 4.10 per cent to 5.74 per cent between January and August.
However, the data noted that this increase was more modest than for many other types of mortgage product over the same period, stating that the average new customer secured a lower rate of 3.71 per cent in H1 2022.
In addition, the research noted that the majority of products now permit early repayment with no extra charge.
Almost nine in ten products (89 per cent) now come with fixed early repayment charges (ERC), which typically decrease to zero over a period of time, after which the customer can repay their loan plus interest before the typical ‘end point’ (where the customer passes away or moves into care) without incurring an ERC.
From outlier to mainstream
David Burrowes (pictured), chair of the ERC said: “Our report shows releasing equity continues to evolve from having been an outlier to being embraced as a nationwide trend, with modern flexible products helping to meet a variety of needs.
“Rising house prices have meant that, while national mortgage debt has grown, it is secondary to vast reserves of housing equity which can help multiple generations to achieve financial security by giving them more options and choices in managing their money.”
Market experts echoed these sentiments.
Will Hale, CEO of Key, the UK’s largest later life adviser, said: “Today’s figures highlight that housing equity is being used across the country to repay mortgages, help families and improve retirement income.
“With an estimated £3tr of unencumbered housing wealth in the UK in the hands of the over 65s, this makes perfect sense as customers look to all their assets to help navigate the current challenges that the cost-of-living crisis.”
Others picked up on the strong regional growth as equity release expands across the country, where once it was seen as a particularly London-centric activity.
Les Pick, director of manufacturing and adviser propositions, more2life, said: “Equity release has traditionally been more common in the south of England, backed by higher average house prices.
“However, the benefits of releasing equity are the same across the UK, so it is particularly positive to see popularity grow 40 per cent in Wales and over a quarter in every region of the North and Midlands.”
Family planning and professional help paramount
The Council’s analysis also shows that just four complaints about equity release products were upheld of those published by the Financial Ombudsman Service in H1 2022, with more than seven in ten equity release complaints to FOS coming from family members or an executor, rather than the customer.
With that in mind, the ERC stated that anyone considering releasing equity from their home should include family members or those close to them in their decision.
Simon Gray, managing director at equity release advisory firm HUB Financial Solutions, said: “When providing advice on equity release consumer protection is the highest priority, so we fully support the Council’s call for potential clients to involve their family in the decision-making process where appropriate.”
In addition, given the complexity of these products, experts acknowledged that professional advice was vital for those looking to release equity in their homes.
Key’s Hale said: “Advisers have an important role to help people understand all their options. Specialist advice is essential in ensuring all individual circumstances are taking into account and recommendations are highly personalised.”
Stephen Lowe, group communications director at retirement specialist Just Group agreed, saying: “Professional advice is crucial to ensuring that equity release is the most suitable solution and offers the options required.”
