Equity release market nears £6bn in new loans: key

The equity release market is approaching £6billion in new loans this year after a record first half in which the average customer released just over £100,000 in property wealth, according to new data from Key Later Life Finance.

The data revealed plan sales rose 24.5% in the first six months of the year to 25,448 from a year ago.

It also shows that the value of new equity released increased by 31.7% to £2.556 billion, a record for new loans and plan sales in a half year.

The average amount released in the first six months was £100,468, more than £5,000 more than in 2021, as increased flexibility and rising property prices attracted new customers with average interest rates of 3.65%.

These are lower than those recorded three years ago when they amounted to 3.92%. The previous two years saw average interest rates at 3.19% in the first half of 2020 and 3.02% in the first half of 2021 respectively.

Key says it has helped existing customers manage their finances in the face of the cost of living squeeze with an additional £876m taken in additional advances and £200m taken in levy, 32% more than at the same time last year.

Clients used drawdown proceeds over the six months to reserve £876m of real estate equity for use, an increase of 32% from £666m in the first half of 2021.

The average draw customer booked £52,363 compared to £45,746 last year and took an initial advance of £58,115.

However, customers who have taken advantage of their direct debit facilities over the past six months have withdrawn an average of £11,406, down from £13,765 last year.

Elsewhere, record low rates and increased product flexibility are encouraging more customers to remortgage, the data shows.

Key Market Monitor tracked those numbers for the first time and found a 79% year-over-year increase in the number of people remortgaging, from 2,130 in the first half of last year to 3,817 this year. year.

Representing nearly one-fifth (19%) of all equity released in the first half of 2021, clients chose to re-mortgage from 5% to 4.2%.

Key’s data shows an increase in the number of customers using their home equity for discretionary spending, but paying off debt is the primary use of the freed-up money.

It revealed that 57% of customers were using some or all of their home equity to pay off debt, up from 53% last year.

While the management of secured debt (40%), unsecured (9%) as well as loans with capital release (15%) continued to guide clients’ decisions, based on their needs rather than their desires, Key says he’s seen an uptick in more discretionary spending as people seek to take advantage of post-pandemic restrictions.

The data showed that the proportion of people spending on vacation rose from 6% in the first half of last year to 12% in the second half of this year, although it still represents only 1% of the amount released.

Home and garden improvements, which can be both discretionary and necessary, also saw a 4% increase in the number of customers using equity for this reason, from 33% in the first half of the year. last to 37% in the first half of this year.

However, with the cost of living crisis at the forefront of people’s minds, the amount spent also remained stable at 7% of the amount released.

Will Hale, Key Managing Director, said: “As an industry, the first half of the year has seen the market return to growth as we strive to develop and grow to better serve owners of more than 55 years. With the cost of living crisis at the forefront of people’s minds, we have seen a continued focus on managing secured and unsecured debt – although the proportion of people including some discretionary spending has increased.

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