Key: £1.47bn worth of property wealth released in first half of 2020

Older homeowners released £1.47bn worth of property wealth in the first half of 2020 following a buoyant Q1 as the impact of the coronavirus and resulting political and economic uncertainty hit the market in Q2, the Market Monitor from Key has shown.

Between Q1 2020 (11,495) and Q2 2020 (8,374), the market saw a 27% fall in the number of customers using equity release and a 45% fall in the amount of new equity released (£949m to £521m).

The total value of plans including reserved drawdown fell from £1.32bn (Q1 2020) to £767m (Q2 2020) over the same period.

While some of this may be due to customers being more cautious, demand has remained strong so the servicing challenges faced by the industry due to lockdown are likely to have had some impact which suggests we may see a bounce back in Q3.

Low volumes in Q2 impacted on H1 figures with the number of plans taken out falling 10% to 19,870 from the same time last year (H1 2019 – 22,216) while total property wealth value released fell 12.6% to £1.47bn from £1.68bn.

The total market including unused drawdown facilities was worth £2.04bn in the six months compared with £2.38bn with the value of reserved drawdown falling to £624m from £706m.

In the first quarter the value of reserved drawdown was higher than last year at £390m compared with £340m.

The average loan amount fell slightly in H1 2020 to £74,014 (H1 2019 - £76,064) while the average property value increased slightly to £321,209 (H1 2019 - £318,571). Average customer ages also remained relatively static at 70-years old (H1 2019 – 71 years old).

Will Hale, CEO at Key, said: “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.

"Whilst the sector has been remarkably resilient in adjusting working practices in the face of lockdown to ensure we can continue to help customers, there are a number of knock on effects from the current pandemic.

“Indeed, not only are cases taking longer to complete but it is only appropriate that 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.”

Dave Harris, CEO at more2life, said: “Today’s figures suggest that 2020 has very much been a year of two distinct quarters with performance in Q1 helping to offset the challenges faced in Q2.

"While 2020 has been a year that very few could have realistically predicted, the strong underlying trends that have driven the market over the last few years remain and we expect to see a return to more normal trading conditions towards the end of the year.

“For lenders, providing robust customer and adviser support at this unprecedented time has been paramount and we are pleased to say that our teams have continued working successfully since lockdown was introduced.

"With so much uncertainty, we are also acutely aware that some of our customers might be more vulnerable than before and we are pleased to see that advisers are working hard to help their customers make smart sustainable long-term choices around if and when they want to access their housing equity.

”As with the rest of the housing market, COVID-19 has had an impact but I am confident that the good work and significant efforts from organisations across the market will help us to return to growth in the near future.”