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Slowdown in equity release lending as borrowers exercise caution

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Lending is still rising, but borrowers are taking out smaller lifetime mortgages
Slowdown in equity release lending as borrowers exercise caution

Growth in equity release lending is slowing down as a result of wider economic uncertainty, said Key.

The equity release advisers said there was a 3% rise in lending for equity release in the first half of 2019, with the number of plans up by 5.6% compared to the same period a year earlier.

Average loans taken by customers fell in value by nearly £2,000 to £76,064 compared with the first half of 2018, as the market stabilised in the face of continued political and economic uncertainty.

Lower equity release mortgage rates are encouraging more customers to remortgage their plans to save money or release additional funds, said Key, with around 5% of customers changing plans in the first half of 2019 compared to just 1% in 2018.

What do borrowers use the money for?

Up to half of all customers used equity release to repay debt – either in the form of mortgages (20%) or unsecured debt (30%).

However, the biggest single use of property wealth remains home or garden improvements (64%) as older borrowers look to age proof their homes in order to remain in them longer, while 28% made gifts to family typically to help with house purchases or weddings.

Will Hale, CEO at Key, said: “Against the backdrop of economic uncertainty, the equity release market has seen a subdued first half with slower growth than in recent years. While the key market drivers of low pension saving and substantial property wealth remain, the over-55s are taking a cautious approach to accessing the value tied up in bricks and mortar at the moment but as confidence returns we do expect the market to pick up.

“The myriad of different reasons that customers use equity release for highlights how vital specialist independent expert advice is to ensure that older homeowners are helped to make the right choices for their individual circumstances.”

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