Equity release sales fall in Q1 as values rise

Equity release sales fall in Q1 as values rise
Credit: Jason Alden/Bloomberg

Equity release sales have fallen 9.5 per cent in the first three months of the year when compared with last year, according to data from Key.

Data from the equity release adviser showed sales were down to 10,341 plans, though the amount released was up.

Total equity released in the first three months of the year, including drawdown and further advances, increased by 12.8 per cent year-on-year to £1.07bn.

According to Key’s analysis, Wales was the only region that recorded a rise in plans sold during the three months, while eight out of 12 regions saw a rise in the total value of new equity released.

House prices contributed to the rise in equity released, the adviser said, as the average LTV rose by only 2 percentage points on an annual basis to 27 per cent in the first quarter of this year.

Will Hale, chief executive officer at Key, said: “The strength of the property market driven by the extension of the stamp duty holiday and the launch of government guarantees for 95 per cent LTV mortgages is helping to increase the property wealth that over-55s can use for retirement planning.”

The average value of a property used for equity release rose 12 per cent to £366,660 from last year - higher than the national average price in March of £232,134, according to Nationwide’s index.

Key added that the South East and London - where average house prices are highest in England - contributed to more than half of all equity released during the quarter, despite accounting for a third (34 per cent) of plans sold.

Martin Wade, director at Access Equity Release, described a rise in equity released as “inevitable”.

Wade said: “House prices have increased steadily as has the price of things that people want to do. Inflation plays a part as does the sheer availability of goods and services. The cost of housing and the cost of living has gone up and people’s expectations and desires have matched this.

“On top of this long term trend, the last 18 months have, I believe, changed attitudes. Our own mortality has become more real and naturally people want to improve their lives and lifestyles sooner rather than wait. With interest rates at an all time low and equity release offering rates fixed for life, there is a compelling argument to move sooner rather than later.”

Claire Singleton, chief executive officer of Legal & General Home Finance, likewise said that “much lower” equity release rates made accessing property wealth a more viable option for customers who want to remain in their homes, rather than downsize.

Figures from Moneyfacts show the average lifetime mortgage rate was 4.07 per cent in late April, compared with 4.23 per cent and 5.09 per cent in April 2020 and 2019 respectively.

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