Equity release market growth led by changing customer attitudes and financial needs

Rebecca Kirk - Market Research Assistant

Published on February 17th 2020

Since 2015 more than £13bn in additional income has been accessed through equity release products and over the last two years the number of firms belonging to the Equity Release Council has grown from 219 to 431. These two facts reflect the increased customer interest in accessing property wealth, and with many first time buyers reliant on support from family to purchase their first home and debt levels high amongst those aged 50-plus, the growth of the market in recent years is primarily driven by financial needs.

Consumers are becoming increasingly comfortable with using property wealth to increase their income in retirement, with 1 in 3 of those set to retire this year planning to generate extra income using their property, whether through re-mortgaging, downsizing or equity release. Research by the London School of Economics (LSE) into later life borrowing included speaking to intermediaries in the sector, who observed that retiring mortgage-free is becoming less important to customers. Researchers found that that customers saw later life lending, whether through re-mortgaging or equity release, as a “financially rational choice” to make effective use of their assets.

Helping out younger family members continues to be a common use of equity release and is part of a wider trend of intergenerational lending to help the younger generation get on the housing ladder. Research has found that 40% of first time buyers in the UK receive inheritance funds early to help fund their deposit, and this is reflected in the findings of the LSE researchers who cited helping children and grandchildren as one of the key motivations for borrowing.

Debt is increasingly common amongst those over age 50, with 1 in 3 of those retiring in 2020 set to do so with an average debt of £17,460. Many customers are choosing equity release to help manage their debts, with research into the uses of equity release showing that 49% of equity release customers in 2019 used the funds help manage debts, loans and mortgages – the second most common use of funds after home and garden improvements.

Demographic information about those approaching retirement in this decade suggests that the equity release market looks set to continue growing, with research suggesting that almost 25% of under 55s may have lost track of at least one of their pensions and over a fifth of Generation X (those born from the early 60s to late 70s) have no pension. In addition to customers wishing to release equity to help manage debts or support younger family members the decreasing levels of retirement provision suggest that over-50s will continue to take a pragmatic approach to their assets, using property wealth to boost their later life income.

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