Two speed Equity Release market emerges in Q2
31 July 2019
- Sales of new drawdown lifetime mortgages grew between April and June while takeup of new lump sum mortgages mirrored Q1 2018 volumes
- More than 7,000 new drawdown plans were taken out in Q2, up 5% from Q1 2019and 2% from Q2 2018
- In comparison, over 3,500 new lump sum lifetime mortgages were taken out – higher than any quarter prior to Q2 2018 despite being the lowest quarterly total of the last 12 months
- A total of £1.85bn housing wealth was unlocked in the first six months of 2019, in line with the same period last year
A two-speed equity release market emerged in Q2 2019 as sales of new drawdown mortgages grew while take-up of new lump sum mortgages mirrored Q1 2018 volumes.
The latest quarterly market figures1 from the Equity Release Council, the UK sector trade body, reveals 7,227 new drawdown lifetime mortgages were taken out in Q2 by older homeowners seeking to release cash from their properties. This total was up 5% from Q1 2019 and 2% from Q2 2018. More than two thirds (67%) of new plans taken out between April and June were drawdown2, the highest share seen since Q4 2017.
In comparison, 3,502 new lump sum lifetime mortgages were taken out, higher than any quarter prior to Q2 2018 despite being the lowest quarterly total seen over the last year.
The industry data highlights the average size of new drawdown plans was consistent with the previous quarter in terms of customers’ first withdrawal (£63,166 versus £62,416 in Q1), although customers reserved more modest amounts of housing wealth for future use (£35,903 compared to £37,069 in Q1). The average size of a new lump sum plan taken out in Q2 was also scaled back slightly to £93,712 (-4% on Q1).
Overall Q2 2019 activity
Total clients served rose by 2% over the quarter to 20,866 and were up 3% year on year. Although the number of new customers was down 1% on Q1 to 10,731, the number of returning drawdown customers increased 7% to 9,154 over the same period, driven by more existing customers having these products.
Total lending between April and June fell slightly compared to Q2 2018 (- 3%) to £911.3m with the year on year comparison decreasing by 6%. Following the busiest Q1 of any year to date, this meant overall market activity in the first half of 2019 was broadly in line with H1 2018. A total of £1.85bn of housing wealth was unlocked in H1 2019 (versus £1.84bn a year earlier) with 21,585 new plans agreed (versus 21,490 in H1 2018) and a total of 41,263 customers were served (compared to 38,912 in H1 last year).
David Burrowes, Chairman of the Equity Release Council said: “The number of people drawing on housing wealth in later life remains high by historic standards and remains an important main
stream funding option for many, despite short-term activity inevitably showing signs of the uncertainty that has impacted other areas of the economy in the current political climate.
“The long-term trend of an ageing population with more individual responsibility for funding retirement and lifestyle needs in later life is unchanged. The emergence of drawdown as the most common product choice shows how innovation has given customers more flexible options to build their plans around.
“Older homeowners are recognising the benefits of including their property wealth as part of their later life financial plans. Indeed, our research shows that more than 50% of people aged 45+ already do so*. This data highlights the considered approach that customers take when accessing their property wealth; we will continue to see bricks and mortar play an important role alongside pensions, savings and other assets”