The fast-paced growth of the equity release market slipped in 2019 as political and economic uncertainty made consumers more cautious.
The latest data from Key, published today (January 17), showed homeowners released about £3.4bn of property wealth last year — 4 per cent less than the £3.6bn for 2018.
The number of consumers opting to release cash from their homes told a similar tale, dropping 3 per cent from 47,000 to 45,600.
Interest in equity release piqued towards the end of the year, however, as £921m was released in Q4 alone — compared to £887m in the third quarter — suggesting a rise in consumer confidence, according to Key.
Overall homeowners released nearly £9.5m of property wealth a day throughout the year.
Will Hale, chief executive at Key, 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.
“Although we saw small year-on-year falls in the value and volume of equity release taken out, the last two quarters were more upbeat and we start the year with a positive headwind fuelling the belief that we will continue to see growth in the equity release market.”
Sales of drawdown plans, which enable borrowers to manage their property wealth and leave cash to be taken later, accounted for 73 per cent of the market last year, compared with 64 per cent in 2018.
This could be down to the rising number of products on the market, with lenders launching more products which offer drawdown as a feature.
Around 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.
The numbers of customers switching from existing equity release plans to take advantage of historically low interest rates also rose to 5 per cent in 2019 compared with 4 per cent in the previous year.
Key predicted a rise in the number of advisers “rebroking” in 2020 as more products came to market with sustained product innovation.
More than two thirds of customers (64 per cent) used some or all of the cash to improve their homes or gardens while 32 per cent funded holidays and 28 per cent gifted to family.
Northern Ireland saw the biggest rise in value released at nearly 17 per cent year-on-year and in plan sales at more than 9 per cent. At the other end of the spectrum, the value released by London property owners dropped from £1m in 2018 to £970,700 in 2019.
Mr Hale said 2020 had the makings of a “very interesting year” for the equity release market but stressed the market needed to continue to educate and engage key audiences to clearly highlight how housing equity could play a role in meeting the challenges that individuals and the country as a whole faced.