Equity release market responds to growing demand

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Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
09/08/2021

Equity release market responds to growing demand

Lenders have continued to improve their lifetime mortgage ranges in July, according to the latest analysis from Moneyfacts.co.uk. The number of equity release options stands at a record high as providers expand and tailor their ranges to cater to demand. The amount of wealth to be drawn using equity release is expected to grow and optimism amongst advisers is evident.

  • Several lenders cut their lifetime mortgage rates in July 2021 and continue to expand their ranges to cater to demand. The average rate stands at 4.32%, compared to 4.92% in 2019.
  • Borrowers are predicted to draw more wealth out of property, over the next decade the amount of equity released per year is set to increase from £3.7bn in 2021 to £6.4bn according to More2Life.
  • The maximum loan-to-value (LTV) available across the market stands at 50%, compared to 49% a year ago, and 46% two years ago.

Equity release market responds to growing demand

Lenders have continued to improve their lifetime mortgage ranges in July, according to the latest analysis from Moneyfacts.co.uk. The number of equity release options stands at a record high as providers expand and tailor their ranges to cater to demand. The amount of wealth to be drawn using equity release is expected to grow and optimism amongst advisers is evident.

  • Several lenders cut their lifetime mortgage rates in July 2021 and continue to expand their ranges to cater to demand. The average rate stands at 4.32%, compared to 4.92% in 2019.
  • Borrowers are predicted to draw more wealth out of property, over the next decade the amount of equity released per year is set to increase from £3.7bn in 2021 to £6.4bn according to More2Life.
  • The maximum loan-to-value (LTV) available across the market stands at 50%, compared to 49% a year ago, and 46% two years ago.

Equity release market analysis

Lifetime equity release deals

Aug-16

Aug-19

Aug-20

Jan-21

Aug-21

Number of deals overall

88

300

383

480

698

Average rate overall (fixed and variable)

5.76%

4.92%

4.13%

4.18%

4.32%

Average max LTV

49%

46%

49%

49%

50%

Source: Moneyfacts.co.uk

Equity release market analysis

Lifetime equity release deals

Aug-16

Aug-19

Aug-20

Jan-21

Aug-21

Number of deals overall

88

300

383

480

698

Average rate overall (fixed and variable)

5.76%

4.92%

4.13%

4.18%

4.32%

Average max LTV

49%

46%

49%

49%

50%

Source: Moneyfacts.co.uk

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“The equity release market has remained resilient during 2021 and, in fact, business is booming and is expected to grow in the years to come. Advisers remain optimistic in the sector and lenders have made it clear that they are prepared to compete and tailor their ranges to suit borrower demand. In the next decade, the amount of equity released per year is predicted to grow from £3.7bn in 2021 to £6.4bn according to More2Life.

“There was a mix of changes to products in the lifetime mortgage market last month, but, positively, most lenders made rate reductions to their range, some several times over. The average rate across the market has risen slightly over the past year from 4.13% to 4.32%, however, upon further scrutiny of the deals, the average max loan-to-value rose to 50% and with higher LTV lending you would typically see higher rates. Several lenders now offer a higher max LTV on average year-on-year and the growth in options among many lenders demonstrates how they have adapted to accommodate demand and why finding the best deal does require good advice to navigate the growing choice available.

“A recent study by More2Life revealed that 94% of advisers are confident in the equity release market over the next 12 months and 54% named product innovation as an important factor. The boom in product choice can provide a deal more tailored to someone’s circumstances, and lenders have shown their commitment to adapt their ranges. At present, Just currently has the largest range with over 300 deals, which rose due to its introduction of a fixed early repayment option, which doubled its range. More2Life, Legal & General Home Finance and Pure Retirement are the next brands to offer the largest volumes of options to navigate.

“The busiest month for lifetime mortgage business during Q2 2021, according to the Equity Release Council (ERC), was June, which could be attributed to the rush to make the stamp duty holiday for those borrowers hoping to pass some wealth as an early inheritance onto their children to help them get a step onto the property ladder. Borrowers may also be using property wealth to make home improvements, either by using a drawdown facility as and when they need it, which remains popular with new customers, versus as a lump sum lifetime mortgage. Whilst ERC research suggests drawdown was subdued during the pandemic, returning drawdown activity in Q2 2021 was the strongest recovery segment versus Q2 2020 with customer numbers up by 67%.

“Borrowers looking to take advantage of equity release need to seek unbiased independent advice to ensure it is the right option for them. Regardless of whether they are adamant they want to release equity out of their home, it is always a good idea to get a second opinion as there may be other alternatives. Starting a conversation with any family members is also constructive to avoid any awkwardness about inheritance.”

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“The equity release market has remained resilient during 2021 and, in fact, business is booming and is expected to grow in the years to come. Advisers remain optimistic in the sector and lenders have made it clear that they are prepared to compete and tailor their ranges to suit borrower demand. In the next decade, the amount of equity released per year is predicted to grow from £3.7bn in 2021 to £6.4bn according to More2Life.

“There was a mix of changes to products in the lifetime mortgage market last month, but, positively, most lenders made rate reductions to their range, some several times over. The average rate across the market has risen slightly over the past year from 4.13% to 4.32%, however, upon further scrutiny of the deals, the average max loan-to-value rose to 50% and with higher LTV lending you would typically see higher rates. Several lenders now offer a higher max LTV on average year-on-year and the growth in options among many lenders demonstrates how they have adapted to accommodate demand and why finding the best deal does require good advice to navigate the growing choice available.

“A recent study by More2Life revealed that 94% of advisers are confident in the equity release market over the next 12 months and 54% named product innovation as an important factor. The boom in product choice can provide a deal more tailored to someone’s circumstances, and lenders have shown their commitment to adapt their ranges. At present, Just currently has the largest range with over 300 deals, which rose due to its introduction of a fixed early repayment option, which doubled its range. More2Life, Legal & General Home Finance and Pure Retirement are the next brands to offer the largest volumes of options to navigate.

“The busiest month for lifetime mortgage business during Q2 2021, according to the Equity Release Council (ERC), was June, which could be attributed to the rush to make the stamp duty holiday for those borrowers hoping to pass some wealth as an early inheritance onto their children to help them get a step onto the property ladder. Borrowers may also be using property wealth to make home improvements, either by using a drawdown facility as and when they need it, which remains popular with new customers, versus as a lump sum lifetime mortgage. Whilst ERC research suggests drawdown was subdued during the pandemic, returning drawdown activity in Q2 2021 was the strongest recovery segment versus Q2 2020 with customer numbers up by 67%.

“Borrowers looking to take advantage of equity release need to seek unbiased independent advice to ensure it is the right option for them. Regardless of whether they are adamant they want to release equity out of their home, it is always a good idea to get a second opinion as there may be other alternatives. Starting a conversation with any family members is also constructive to avoid any awkwardness about inheritance.”

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way Moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

 

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way Moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

 

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Rachel Springall Press Officer / Finance Expert
Eleanor Williams Press Officer / Finance Expert