2022 A Good Year For Equity Release?

It probably comes as no surprise that the number of over 55s releasing equity fell throughout 2020. Uncertainty over Brexit and Covid-19 saw many households put plans on hold.

However, as predicted 2021 is proving to be a good year for the equity release market, as borrowers making plans for later life regain confidence and demand grows. According to the latest data from the Equity Release Council over £3.4 billion has been accessed so far this year via equity release, with no sign of this level of interest waning in 2022.

What has happened in 2021?

As lockdown has eased, pent up demand saw equity release lending increase, resulting in a busy end to 2020. This promising end indicated a resilient market that would rebound quickly, and it has. By the end 2021, the amount of equity released by UK homeowners is expected to reach over £4 billion, even exceeding pre-covid levels,.

According to research from Key, customers released an average of £101,593 in Q3 2021 — 23% up on the same quarter in 2020, with over 70% of this money being used to fund “big ticket items” such as gifting and managing debt.

Over £550m of the money released was used to clear debts while more than 40% of the cash gifted to family went towards house deposits.

2021 has also seen a huge surge in over 50s customers seeking equity release to undertake home improvements, increasing by 134% compared to the same period last year, according to data from Legal & General Financial Advice.

Lower rates and greater choice is fuelling interest in equity release

Competition has created more choice than ever before. Over the last two years alone the number of equity release products has more than doubled, hitting a high of 769 plans on the market in June 2021.

Stiff competition has also driven interest rates down to as little as 2.5%. With so much choice, speaking to an equity release specialist such as Age Partnership could be a good idea, as they can compare leading UK equity release providers on your behalf to help you find the best deal.

Drawdown lifetime mortgages are still the most popular type of equity release plan, attracting 57% of new customers in Q3 2021, closely followed by 47% who chose a lump sum lifetime mortgage.

The outlook for 2022

Equity release is expected to continue going from strength to strength. Research by More2Life found that 94% of advisers feel confident about the outlook for the equity release in 2022. This is likely to be influenced by the increase in customers releasing equity to pay off interest only mortgages, an issue that according to the FCA, many homeowners will face over the coming years.

Interest rates have finally started to rise after years of record lows, so now may be a good time to consider equity release as an option. Interest rates on lifetime mortgages currently remain lower than they were pre-pandemic and, on most products, the interest rate is fixed for life so you won’t be negatively affected by any future rises in the bank base rate.

Is 2022 a good time to release equity?

A lot has been done to improve the image of equity release. Regulation is tight with strict controls in place to protect borrowers. The range of lifetime mortgage products on offer has also increased, providing consumers with greater flexibility and control.

Over 55s considering releasing equity from their home in 2022 have choices. They can choose to repay some or all of the interest on a regular or ad-hoc basis or protect a percentage of their family’s inheritance.

And the relatively new retirement interest only mortgage offers another way of borrowing against your property without the worry of monthly repayments against the capital.

Plus, with equity release interest rates remaining low and the growth in property prices high, 2022 could be a good time to consider equity release if you are looking to unlock money tied up in your home.

However, whether a lifetime mortgage is the best option for you will depend on your requirements and personal situation. There are alternatives to equity release such as downsizing, budgeting or remortgaging that you should consider, as well as the pros and cons.

Which is why it is important to seek professional advice before you make any decisions.

For more information on equity release, read our helpful guide.