Financial Services, Property for individuals

Is Equity Release a popular lending option?

We are going to take a very brief look at answering the question, is Equity Release a popular lending option?

What is Equity Release?

Equity Release is a relatively new product to the financial market, and it has been rebranded as ‘Lifetime Mortgage’ over the last few years. ‘Home reversion plans’ still exist as a product, but the uses of this product in a practical sense are few and far between in the current market.

For a more in-depth look at Equity Release, see our Article here Equity release explained.

We wanted to explore the growth of the Equity Release Market to see whether these products are becoming more popular. The Equity Release Council (ERC) seem to think so.

The Equity Release Council 2021 year report

The ERC released an update on the financial year of 2021. This update explains the performance of Equity Release and its band of products over the financial year.

The ERC claim that in the 2021 Financial Year, 76,154 plans were either; created, extended or drawdown reserves accessed by members of the public. 2020 saw this figure at 72,988, making 2021 a 4% increase.

In cash terms, this translated to £4.8bn released from properties in 2021, an average of about £63k per transaction. The ERC quote that the lending amount was £3.86bn in 2020, meaning that 2021 saw a 24% rise.

The ERC explained the average cash lump sum for new Equity Release customers in 2021.

New customers agreed similar amounts of borrowing via drawdown and lump sum products during 2021. The average lump sum plan was £124,990, while the average drawdown plan featured an up-front amount of £89,786 with £34,950 held back for future use, making £124,735 in total.

So why is there such a significant difference between the number of new Equity Release customers and the amount of money released?

The rise in property prices has partially led to increased property prices. However, the other factor the ERC has placed their finger on is wealthier individuals with more expensive homes opting into an equity release product. The increased general wealth would mean that individuals would release more from their property.

So, is Equity Release a popular lending option?

Its growth is on the up is the safe answer. Over the last few years, the general market has struggled with the pandemic, which somewhat skewed figures. However, the consensus is that it is on the rise as a stable and safe financial product for the over 55’s.

Is Equity Release Safe?

The short answer is yes. The Product of a Lifetime Mortgage is well designed, but in reality, it is conditional based on your circumstances and your long-term financial plans. Therefore, it will be best practice to seek financial advice before deciding.

The Lenders for Equity Release are your usual well-trusted organisation like Nationwide, Aviva and Legal & General.

For me, there are a few issues surrounding the overall sale of Equity Release Products, more to do with large brokers, and we will look at this further another time.

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