Older homeowners released £1.42bn of property wealth in the first half of 2020, despite the coronavirus pandemic hitting sales of equity release schemes.
The latest figures from Key’s Equity Release Market Monitor show that both the number of equity release schemes, and the amount of money released was down on figures for the same period in 2019.
In total 19,870 equity release plans were taken out over this period, a 10 per cent reduction on the year before; while the amount of equity released fell by 12.6 per cent.
Not surprisingly the falls were sharpest in the second quarter of the year, as the economic lockdown took effect and advisers and lenders faced delays in processing these borrowing schemes, often used to subsidise pensions.
The figures show though there has been a switch in why many homeowners are opting for equity release, with increased numbers prioritising debt repayment over home improvements or holidays.
The Key data shows in the first half of the year, 24 per cent of the equity released was used to repay mortgages, and 16 per cent to repay other debts, just 16 per cent was spent on home renovations or improvements.
But the first and second quarter of the year, the proportion of customers using equity release to fund home improvements and holidays fell, from 17 to 14 per cent and 8 to 4 per cent respectively
Over the same period those using equity release to repay mortgages rose from 25 to 31 per cent. In both quarter 21 per cent said they were using some or all of this money to make gifts to family members.
Key chief executive Will Hale says: “It is only appropriate that those customers exploring equity release during the time of the pandemic have been focused on shoring up their finances by repaying debt and supporting their wider families rather than looking to spend money on holidays or home and garden improvements.
“Even with the changes that the Chancellor recently announced, many older consumers are likely to be extremely cautious about their choices around their spending for the foreseeable future – although we may see an increase in gifting to family members looking to get on, or move up, the housing ladder given the stamp duty holiday.”
He added: “The unprecedented circumstances the UK and the world finds itself in due to the coronavirus has been reflected in the significant slowdown in the equity release market in the second quarter.
“People are delaying their decision to access their housing equity due to the current uncertainty. At Key, we have certainly been having these types of conversations with customers and really focused on helping people decide whether they have an immediate need or perhaps can wait until society returns to a situation when booking a holiday or age-proofing their home is possible.
“That said, demand has remained strong as more customers look to explore how housing equity could help support them in later life and, as we move to more normal trading conditions, we are confident that these macro drivers will ensure that we will return to growth by year end and into 2021.”