Many older homeowners in the UK have pushed back plans to sell their properties, but that did not stop them from turning to equity release during the pandemic.
Figures by advisory firm Key show that over £3.4bn in property wealth was released last year.
Even though this marks a fall from the £3.5bn ($4.8bn, €4bn) in 2019, it shows people are still using their properties as a source of wealth.
The average sum released grew by 9.2% in 2020 to £84,919 – up from £77,735 in 2019.
Drawdown remained the most popular product with 70% of all sales, compared with 73% in the previous year; and the average customer age remained consistent – 72 in 2019 and 71 in 2020.
Among the most popular reasons for choosing equity release are refinancing a mortgage (28%), helping wider families (22%), or for unsecured borrowing (18%).
Claire Singleton, chief executive at Legal & General Home Finance, said: “We’re unlikely to see the full impact of the pandemic on retirement planning for some time, but these figures show that many people will look to property wealth to help fund the lifestyle they’re seeking in retirement and to support their families financially.
“We also know, from our own research, that nearly half of older people in the UK now provide financial support to younger family members and this is no longer just to support major purchases, such as buying a property or paying for a wedding, as gifting due to covid-19 pressures was evident last year.
A different 2021?
Will Hale, chief executive at Key, said: “While 2020 is down on 2019, the fact that we have only seen a 4.4% drop in the value of equity released suggests that customer demand remains strong supported by the efforts of advisers, lenders and other service providers in this challenging year.
“Discretionary spending has fallen as equity release increasingly looks to support clients’ aspirations to help their families and make their finances as resilient as possible by refinancing debt.
“While most people aspire to reach retirement without any mortgage or unsecured debt, this is certainly not possible for everyone and equity release can help to take the pressure of these families while still providing avenues for repayment.
“With the end to the stamp duty holiday on the horizon, it is also not entirely surprising to see that many older homeowners have taken the opportunity to pass wealth down the generations and help children or grandchildren onto the property ladder.
“While this may change as we head in 2021 and the holiday comes to an end, I suspect the desire to help families will remain a strong driver of this market in years to come.”
