How has the equity release market developed during the last year?


While Britain’s pension system was once the envy of Europe, the combination of an aging population and economic turbulence has left a growing number of retirees facing a financial shortfall once they cease to work.

This is why equity release has emerged as an increasingly popular financing option in the modern age, with an associated equity release product launched every 28 hours through 2020. This is according to Key, which operates as the UK’s leading adviser and referral service for equity release products.

But what exactly is equity release, and what were the precise findings of Key reports? Let’s find out.

Starting with the Basics – What is Equity Release?

In simple terms, equity release refers to the process of accessing the capital value within your property.

This affords you the opportunity to obtain either a lump sum payment or a series of monthly payments (or type of annuity), utilising the estimated value of your house while simultaneously enabling you to retain its use.

This is a higher flexible financial product, and one that often offers the best of both worlds to those approaching retirement.

There is a catch, however, as the capital leveraged from the income provider as part of the equity release scheme must be rapid at a future point in time. This is usually when the home-owner dies, so this cost may actually bepast on to a loved one or beneficiary.

What Did Key’s Report Tell Us?

We’ve already touched on how a new equity release product was launched every 28 hours in the UK through 2020, with this the result of numerous factors such as innovation, improved repayment rates and tailored product features.

These factors also saw the number of market plan options increase across the board, with approximately 525 available to applicants during the previous 12 months.

This represents a seismic increase of 510% from 2017’s figures, which showed that there were a paltry 86 plans available within a relatively narrow and inflexible marketplace.

The biggest increase in this respect came in 2019, when the number of plans increased from 161 to 315 at a rate of 96%. The most recent percentage increase was 67%, so there’s no doubt that innovation and diversification remains two of the biggest trends driving equity release growth on these shores.

What About Interest Rates?

Crucially, a marked decrease in the average interest rate has also helped to trigger the rising prevalence of equity release schemes in the UK.

More specifically, the average equity release interest rate in June 2018 was 4.6%, but this has fallen incrementally to just 4.05% last month (a 12% decrease in total).

This has certainly helped to make equity release initiatives increasingly popular in Britain, with this trend only likely to continue in the wake of the coronavirus pandemic.

Remember, household finances are increasingly strained against a backdrop of higher unemployment and stagnant wages, so older home-owners may look to leverage the capital value of their property to help boost their retirement earnings.