Equity release advisers across the industry are expecting strong results for 2020 and there are many reasons for confidence. Figures for 2019’s final quarter are yet to be released but with £2.8 billion released in Q3, advisers are optimistic that in 2020 total equity release lending will exceed £5 billion.
The UK’s large over-50s population is a reason to be cheerful for the equity release market. With 23 million people aged over 50, there is strong potential for growth in customer numbers in 2020. Advisers predict that changes in customer demographics and loan values will drive market growth; 38% expect younger customers to take out equity release and 21% predict that loan sizes will increase. Industry research suggests that those over 55 hold £383 billion of funds in their property which can be accessed to supplement their later life income, backing up the confidence that advisers feel about the equity release sector.
As house prices continue to rise, intergenerational wealth sharing is likely to remain a significant factor driving growth in the later life lending sector. A shift towards younger customers is likely to be prompted by homeowners choosing to utilise some of the value in their homes to help more junior family members get on the property ladder, with 59% of advisers saying that the most likely reason for customers to take out equity release is to gift funds to their family.
Many over-50s do not yet fully understand equity release, with 15% of homeowners telling surveys that lack of understanding would prevent them from releasing equity and advisers have cited negative perceptions as the biggest barrier to customers releasing equity. The significant size of the over-50s demographic offers the industry a major opportunity to engage with homeowners to explain the benefits offered by equity release and address mis-conceptions. This view is shared by 75% of surveyed advisers, who believe that market growth in 2020 is likely to be driven by increased customer awareness of equity and greater comfort levels with products.
After market growth continued in 2019, evidence suggests that advisers are right to be optimistic about the prospects for the equity release market in 2020. There are still large number of potential customers in the 50-plus demographic to engage with about the financial solutions that equity release can offer and as house prices continue to rise, it is likely that wealth sharing between generations will continue to be a major contributor to market activity.
