The equity release market growth story is an impressive one with all the indicators pointing to strong demand as advisers and their clients make full use of property wealth.
Since 2011 the market has doubled in size and it is now 33 per cent higher than its pre-recession peak, with a total of £1.61bn released in 2015, after yet another record year.
More than 22,500 new plans were agreed last year for the first time since 2008, and the most recent figures from the Equity Release Council notched up a series of new records with lending hitting quarterly, half-year and annual highs.
It has come a long way from the doldrums of 2011 when total lending hit a post-recession low of £789m.
All the forecasts are for further growth, with predictions that it will easily break £2bn this year and even £5bn a year by 2020. New lenders are launching, with Legal & General making a major investment in the market, and rates have dropped below 5 per cent for the first time.
The growth story is very welcome for the Equity Release Council as it celebrates the 25th anniversary of the introduction of the first industry standards in 1991 and works with the Treasury and Financial Conduct Authority to help develop the market and meet growing demand for using property wealth as a major part of retirement planning.
It is also very welcome as a reminder for everyone in the industry to ensure that the benefits of equity release are widely understood by clients and to focus on ensuring that the challenges are understood too.
Property prices have surged in the past year, with government figures now putting the value of the average house at £288,000. The average price climbed £18,000 last year and is 6.7 per cent higher than 2014.
| Key Points |
Since 2011 the equity release market has doubled in size. Investing in a house has been one of the big success stories and certainly compares very well with the stock market. If house prices rise by 1 per cent a year for 15 years the £300,000 house will be worth £348,290 at the end of term. |
With inflation at around 0.3 per cent and average wage growth at 2 per cent houses have been big earners for those who have managed to get on the housing ladder.
Investing in a residential property has been one of the big success stories and certainly compares very well with the stock market and average defined contribution pension funds.
Of course the average house price is just an average – in some areas of the country such as London and the South East, average homes are worth more than £500,000 and there are predictions millions of us will be millionaires thanks to our homes.
Looking at the basic figures, the case for equity release for clients is straightforward. Your home is your biggest asset so why not make use of the wealth in it? It is a simple proposition.
