The equity release market consolidated its growth throughout 2019 as the fast-paced expansion of recent times has started to wane.
Figures from the Equity Release Council, published today (February 3), showed older homeowners released £3.92bn of housing equity in 2019 — in line with last year’s total of £3.94bn.
This marked a slowdown on the growth experienced by the market in recent years. The annual value unlocked from housing has grown almost four-fold over the past decade, from £945m to nearly £4bn.
Mark Gregory, founder and chief executive of Equity Release Supermarket, said: “There are numerous reasons behind a year of consolidation within the equity release market.
“Lack of confidence within the broader housing market, predominantly due to the uncertainty surrounding Brexit, has no doubt played a huge part in this.”
Demand in the market remained high, according to the figures, as 44,870 homeowners released cash from their homes compared with 46,297 in 2018.
Interest in equity release piqued in the final quarter of 2019, when more than £1bn was released from property.
Will Hale, chief executive of Key, said this showed the fundamental growth drivers of the market remained intact and there was strong demand from older homeowners for information and advice on how to make the best use of property wealth.
Consumers who opted for a lump sum payment released £97,300 on average while those choosing drawdown plans, which enable borrowers to manage their property wealth and leave cash to be taken later, took £64,000.
According to the Equity Release Council customers took advantage of record low rates and increasing product flexibilities throughout the year.
Lenders continue to add voluntary or partial repayments with no early repayment charge while the average interest rate on an equity release product dropped to a record low of 4.91 per cent in September 2019.
David Burrowes, chairman of the Equity Release Council, said: “After a period of steady growth, the market has reached a point of consolidation in 2019 with lending volumes in line with 2018.
“The sector enters 2020 in a strong position with updated standards and a greater number of diverse members signed up than ever before.”
Mr Burrowes said equity release had previously been viewed as a “niche product” but that its untapped potential was now being recognised.
This comes as a growing number of customers are recognising the important role property wealth could play in meeting their retirement needs, he added.
Mr Hale agreed. He said the equity release market was well positioned for a return to growth after last year’s political and economic uncertainty had impacted confidence.
“Continuing innovation by equity release lenders means there are now more than 300 products available and the combination of historically low rates as well as flexible features such as the ability to service interest or repay capital demonstrates that the market is developing rapidly and is suited to help a wider range of customers.”