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Homeowners released record £6.2bn of equity in 2022

Nick Cheek
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Nick Cheek

A record £6.2bn of equity was released by homeowners in 2022, as more people tapped into their property wealth amid the cost-of-living crisis.

The equity release market has doubled in size since 2017, with a record £6.2bn of property wealth accessed last year. This is a 29% increase from the £4.8bn recorded in 2021, according to the Equity Release Council.

Last year, a total of 93,421 customers took out new plans, made use of drawdown facilities or agreed extensions to existing plans.

This represents a 23% year-on-year increase, comfortably overshooting the previous peak customer number of 85,497 reached in 2019.

Over the year, 49,285 new plans were agreed, an increase of a fifth on the previous year. This was also a fresh high on the earlier record of 46,396 new plans agreed in 2018. 

The rise in new plans appears to tie in with a change in the rules. Since 28 March 2022, all new plans have guaranteed customers the right to make voluntary penalty-free partial repayments without risking repossession if they cannot afford to do so.

Record-breaking year but Q4 bucks the trend

While 2022 was a record-breaking year for the equity release sector, the Council revealed that in Q4 alone, activity dipped in the aftermath of the disastrous mini Budget which saw rates rise, product availability cut and shake consumer confidence.

During Q4, total new and returning equity release customers reached 20,597, down from the record Q3 2022 figure of 25,591. However, this was still a 3% year-on-year rise from 19,975 in Q4 2021.

Customers borrowed £1.36bn of property wealth between October and December, marginally higher than £1.34bn in the same period a year earlier. However, this figure was down 20% from £1.71bn recorded in Q3, “bucking the usual trend whereby Q4 is the busiest quarter of the year”, the ERC noted.

It added that “December was not only the quietest month of Q4 but quieter than any month since before the Covid-19 pandemic broke out”.

‘Glimpse of market’s potential’

David Burrowes, chairman of the Equity Release Council, said: “We saw a glimpse of the equity release market’s potential in 2022 as it returned to its previous growth path with a growing customer base making use of improved products and added protections.  

“In a climate where retirement incomes have to stretch further for longer, property wealth is as important to many people’s financial wellbeing as their pension.

The unmet needs of the UK’s ageing population have seen the equity release market double in size since 2017, channelling decades of experience in helping older homeowners to gain financial freedom.

“Factors outside the industry’s control meant 2022 ended on an unusually quiet note in December, after the mini-Budget fuelled rate rises and tightening criteria. However, releasing equity is not a choice to make on a whim, and we are encouraged by signs that customers are pausing to assess their options. Seeking informed financial advice and independent legal advice from firms who sign up to Council standards is essential at the best of times, and more so now than ever. 

Practicing caution 

Equity release experts said despite growth in 2022, the market should be prepared for borrower caution this year. 

Will Hale, CEO at Key Later Life Finance, said: “There is no doubt that borrowers and their advisers have become more cautious – and rightly so in this higher interest rate environment. However, whether the answer is downsizing, a retirement interest-only product, equity release or delaying a decision altogether, specialist advice remains vital in helping customers make the best choice for their individual circumstances.” 

Stuart Wilson, chair of Air Club, said due to affordability challenges in the residential mortgage sector, over 55s would turn to the equity release market for support. 

He added: “However, this is likely to be different from what they may have considered in January 2022 and product flexibilities such as the ability to make ongoing interest repayments become more attractive than ever before. 

“While there is no doubt that 2023 will be more challenging for the market, we would anticipate an increase of customers in 2023, but likely borrowing a lower average amount as advisers counsel their clients to control debt if possible.” 

Burrowes added: “While some consumers may delay a decision about unlocking property wealth in 2023, many people will find that releasing equity is an appealing and essential step to move ahead with their lives and support their families’ needs.”