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Gifting Helps Drive Equity Release Record Growth

  • Lending and plan sales hit new all-time high for first quarter
  • Retired homeowners make an average £74,000 from their homes, Key Retirement’s Q1 2018 Equity Release Market Monitor shows

Gifting is continuing to drive expansion in the equity release market with one in four pensioners using property wealth to help family, new analysis from leading over-55s finance specialist Key Retirement shows.

Gifting Increases

Around 30 retired homeowners a day gave away some or all of the cash they released from their houses in the first three months of the year, Key’s Q1 2018 Equity Release Market Monitor shows (click here for the report  www.keyretirement.co.uk/market-monitor).

The numbers using property wealth for gifting increased to 26% from 22% in the first quarter with over 2,700 retired homeowners helping family with a wide range of issues including house deposits, university and school fee, debt repayment, holidays and even starting businesses.

Property Wealth Continues to Grow

The total value of property wealth released to the end of March grew by 23% on the previous year to £777 million and plan sales increased by 22% to 10,495 – both new record highs for the first quarter.

Homeowners gained an average £74,047 tax-free each by using equity release demonstrating the importance of property wealth in retirement planning with Londoners making the most on average at £128,400.

Home and Garden Improvements Top the List:

The most popular use of the cash was to fund home and garden improvements with 63% of retired homeowners spending money on their houses. However, the size of the average amounts being released means 31% were also able to pay for holidays.

Debt remains a major issue in retirement with a fifth (21%) paying off existing mortgages including interest-only capital repayments and 30% clearing credit cards and loans.

Key’s Equity Release Market Monitor, which reflects the market for Equity Release Council members and non-members shows the South East of England accounted for more than a quarter of all equity release sales and nearly 30% of total lending.

Dean Mirfin, chief product officer at Key Retirement, said: “Gifting is a major motivation for equity release and our data shows it is more a case of parents and grandparents wanting to gift rather than children asking for help.

“They’re motivated by the desire to help when the money is really needed and being around to see the difference that it makes. In addition, equity release enables them to have some control over how the money is ultimately used.

“They are being helped in this by a very competitive market place with rates fixed for life at their lowest ever levels as increased competition and new lenders means rates on plans are lower than many mainstream lenders’ variable rates.”

Regional Overview

Across the country almost all 12 regions saw growth in the overall value of property wealth released and the number of plans sold with East Anglia recording the biggest increase in property wealth released and the West Midlands seeing the biggest rise in plan sales.

The total value of property wealth released soared by +54% in East Anglia and plan sales surged by +52% in the West Midlands. Other hot spots for property wealth released included Scotland at +46% and the West Midlands by +42% while strong areas for rising sales of plans included East Anglia at +47% and the East Midlands on +33%. Only Northern Ireland saw plan sales and property wealth released drop year-on-year.

RegionNumber of plans sold Q1 2018 Number of plans sold Q1 2017Total value released Q1 2018 (£ million)Total value released Q1 2017 (£ million)
South East2,7312,431£230.666£204,422
South West1,1441,044£81.070£80.350
North West904691£48.597£38.872
East Anglia809592£58.799£38.120
East Midlands908681£48.961£39.950
West Midlands786517£49.734£34.931
Yorkshire & Humberside664560£35.526£30.356
North East259207£13.515£11.089
Northern Ireland5761£2.924£3.538

Around 68% of all sales were drawdown plans, including 16% in enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions.  Single advance lifetime mortgages accounted for 32% of sales of which 17% were enhanced products.

Anyone looking to release equity from their home can get Key’s independent guide to equity release by calling 0800 531 6027 or visiting www.keyretirement.co.uk/equity-release/free-guide/