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Equity release market ended 2020 on a high

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More lifetime mortgage plans were agreed in the last quarter of the year than any other period of 2020
Equity release market ended 2020 on a high

The last three months of 2020 saw 11,566 new equity plans agreed, according to the Equity Release Council, making quarter four the busiest quarter of the year.

It said that activity was helped by pent-up demand from earlier in the year, as customers progressed plans they’d previously put on hold.

But lending for the whole year was still down as a result of the pandemic. 2020 saw 40,337 new plans agreed in total compared with 44,870 in 2019.

What borrowers want

Almost three in five new customers (59%) opted for drawdown lifetime mortgages in quarter four, down slightly from 61% a year earlier.

Lump sum lifetime mortgages made up 43% of new plans agreed across the whole of 2020. This is the largest annual share of activity since 2009 (44%) and likely to be influenced by customers with interest-only mortgages reaching maturity.

The average new lump sum lifetime mortgage agreed in quarter four was £104,501, an increase of 3% compared to the same time the previous year.

David Burrowes, chairman of the Equity Release Council, said: “These figures offer encouraging signs of market resilience after a year that presented huge challenges to household finances and business operations.

“Over the last decade, releasing equity to boost your finances in later life has grown from a niche pursuit to a competitive market that has stabilised at £3.9bn of lending activity for the last three years, despite significant headwinds driven by Brexit uncertainty and the Covid-19 pandemic.

“The unusual patterns of activity in 2020 show some customers biding their time before accessing property wealth. New plans were delayed from earlier in the year and fewer customers have made use of drawdown reserves or sought extensions of existing loans. Releasing equity is not an overnight decision and should only be entered into after considering all alternatives.”

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