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Fewer customers opting for equity release as higher interest rates and mini Budget hit sales

Nick Cheek
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Nick Cheek

The value and volume of equity release fell in the first three months of 2023. However, the number of single women taking out equity release schemes grew during the quarter.

In the first three months of the year, there were 6,975 plan sales, down from 12,551 last year. Meanwhile, the value of new equity released totalled £569.9m, down from £1.4bn. That’s according to figures from the Key Equity Release Market Monitor. Borrowers released £81,703 on average, down on the £111,511 average seen last year. 

Key said that the impact of the mini Budget on interest rates, product availability and loan to value (LTV) limits had resulted in fewer people accessing the wealth in their homes. 

The firm predicted that the second quarter and the second half of the year would be stronger due to interest rates falling, an increase in LTVs as well as lenders and products coming back to market. 

Money used for essentials 

More than a third, 34%, of equity released was used to repay mortgages while 15% went towards remortgaging existing plans. 

A fifth of people unlocked wealth to pay off unsecured debt, compared with 29% who did the same last year. Key suggested this may be down to people focusing on more immediate needs such as their mortgages, to protect themselves against higher rates. 

Almost half (45%) of borrowers used the loan to pay for garden and home improvements, while 11% of the money released went towards essential maintenance such as heating, doors and windows. 

The proportion of borrowers using equity release to support family stayed flat at 19% annually, but the share of the value fell from 15% to 13%. 

Rise in single women borrowers

The average age of borrowers rose from 70 to 71, and just 27% of borrowers were under-65. There were 5% more single women taking out equity release, including those who are divorced or widowed, accounting for 31% of borrowers. Just over half of borrowers were couples and 15%were men. 

Ben Waugh, managing director at More2Life, said: “Whenever we look at the later life market, it is important to take a longer view.  

“While over half of customers are couples, that 31% of clients are single women highlights the vital support that property can provide to often underserved demographics.”

Innovation and boosted demand 

Will Hale, CEO at Key, said: “There is no denying that the first quarter of 2023 was a tough one for the equity release industry. However, as rates start to fall, confidence returns and the product flexibilities are increasingly appreciated, green shoots are returning to the market with April and May seeing more positive volumes. 

“Speaking to customers, we know that there is pent-up demand as people look to boost retirement income, tackle rising costs and support their families. However, with the support of their adviser, they are being cautious around when to borrow, how much to borrow and considering if there are other options which better support their needs – both in the long and short term.” 

Hale said he expected customers to return to the market and make use of the increasingly flexible product features.