Retired homeowners cashed in more than £3 billion of property wealth last year as the equity release market expanded at a record rate, new analysis from leading over-55s finance specialist Key Retirement shows.
Homes paid out more than £8.2 million a day last year to pensioners with the average retired homeowner using £77,380 of property wealth to boost their standard of living.
The total value of property wealth released in 2017 grew 40% on the previous year to £3.014 billion – the fastest rate of growth on record and the sixth increase in a row taking it to more than double its size in 2014, Key’s 2017 Equity Release Market Monitor shows.
More than 100 retired homeowners tapped into their property wealth to enhance their retirement finances every day last year as plan sales increased by 41% to 38,955 from 27,666 in 2016.
Homeowners unlocked an average £77,380 tax-free each by using equity release highlighting the importance of property wealth in retirement planning.
The most popular use of the cash was to fund home and garden improvements with 64% re-investing some or all of their money in their houses. In addition to the high percentage taking care of their homes one in three (33%) were taking more holidays while 24% helped family and friends.
However, many used the money to clear debts with a fifth (22%) paying off existing mortgages including interest-only capital repayments and 31% clearing credit cards and loans.
Londoners cashed in the most taking an average £133,700 compared with nearly £49,000 in Scotland, Key’s Equity Release Market Monitor, which analyses data for Equity Release Council members and non-members shows. Around 27% of all plan sales were in the South East of England which accounted for nearly a third of the property wealth released during the year.
Dean Mirfin, chief product officer at Key Retirement, said: “Expansion in the market is being driven by customer demand as retired homeowners’ confidence in making full use of their property wealth continues to grow.
“2017 saw a series of records broken but perhaps most significant is the pace of expansion last year with around 40% growth in plan sales and the total value released at an all-time high.
“More lenders are launching in the market in response to demand and that in turn is increasing competition, driving down rates and bringing new innovative features to the market as expert advisers increasingly recognise how property wealth makes a major difference for retirement income.”
Across the country all 12 regions saw growth in the value of property wealth released and the number of plans sold with the East Midlands recording the biggest increase in property wealth released and the South West seeing the biggest rise in plan sales.
The total value of property wealth released soared by 60% in the East Midlands and plan sales surged by 50% in the South West. Hot spots for lending growth included the South West at 55% and Northern Ireland at 51% while strong areas for plan sales included the North East at 48% and East Anglia on 47%. Every part of the country saw plan sales increase by 30% or more while the lowest rise in total wealth released was 16% in Scotland, but against a 30% increase in new plan numbers.
| Region | Number of plans sold 2017 | Number of plans sold 2016 | Total value released 2017 (£ million) | Total value released 2016 (£ million) |
| South East | 10,504 | 7,451 | £953.6 | £670.4 |
| London | 4,172 | 3,081 | £557.7 | £440.5 |
| South West | 4,907 | 3,268 | £373.9 | £240.5 |
| North West | 3,245 | 2,323 | £183.8 | £128.8 |
| East Anglia | 2,947 | 2,004 | £206.2 | £144.2 |
| East Midlands | 3,164 | 2,201 | £194.4 | £121.6 |
| West Midlands | 2,727 | 2,007 | £163 | £118.6 |
| Scotland | 2,058 | 1,568 | £100.8 | £86.6 |
| Yorkshire & Humberside | 2,244 | 1,628 | £120.8 | £88.5 |
| Wales | 1,628 | 1,212 | £88.1 | £66.6 |
| North East | 1,071 | 723 | £56.9 | £38.2 |
| Northern Ireland | 291 | 200 | £15 | £9.9 |
| UK | 38,955 | 27,666 | £3,014 | £2,154 |
Around 62% of all sales were drawdown plans, including 17% enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions, compared with 38% from lump sum single advance lifetime mortgages which includes 18% of 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/
These figures come just ahead of the official set from the equity release market’s most reliable source – the Equity Release Council, which will have accurate figures from all lenders and adviser firms holding membership. I do expect that we will be very close to Key’s estimate, which will mark another outstanding year and provide further evidence that homeowners are embracing equity release in their retirement years.