Equity release advisers optimistic despite fall in activity

Equity release advisers optimistic despite fall in activity

Equity release market activity has declined by a third, as the amount of equity released and number of new plans agreed both fell in the second quarter of this year, according to the Equity Release Council.

Statistics for Q2 2020 from the industry body, published today (July 28), found a 34 per cent decrease from the previous quarter in the amount of equity released, from £1.064bn to £698m.

The number of new equity release plans agreed also fell by 34 per cent, from 11,079 in the previous quarter to 7,341. According to the industry body, the figure is the lowest in any quarter since Q2 2016.

David Burrowes, chairman of the Equity Release Council, said: “Equity release market activity continued to mirror wider economic conditions, with the confidence of early 2020 giving way to caution as households assess the impact of coronavirus on everyday life. 

“Careful precautions have kept the market open to those who wish to choose the option of equity release and ensured customers have access to property wealth to help meet important financial and social needs.

“That said, the fall in the number of new plans and fewer returning customers accessing extra funds are clear signs of people pausing to see how the wider situation unfolds.”

The number of new and returning customers in Q2 stood at 13,617, down 38 per cent from 21,884 customers in the previous quarter.

However, the industry body noted a slight recovery towards the end of the quarter as the number of new plans completed rose from 2,229 in May to 2,579 in June, although this remained 30 per cent below the average monthly figure for Q1.

The Equity Release Council’s latest statistics come after advisers predicted a boom in the equity release market during the pandemic.

Alan Lakey, director at Highclere Financial, stood by that assessment.

He said: “It’s no surprise that Q2 business was down because many potential borrowers were far more concerned about their health and lenders struggled to put in place valuation methods.

“This meant that the vast majority of applications suffered three- to six-week delays. The third quarter will likely show an explosion because it will enjoy business that started in Q2 but was delayed in some fashion.”

Similarly, Mark Gregory, CEO of Equity Release Supermarket, said: “July’s performance to date indicates that the equity release market is seeing a strong and immediate ‘V’ bounce as applications are back to pre-Covid levels with lenders quickly returning to providing their usual service standards.

“Lenders are also continuing to develop innovative, flexible new plans with all-time low interest rates and so we remain confident as we enter H2.

"The only caveat being the incomplete picture of the pandemic’s longer-term impact on property prices.”