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Equity Release Supermarket respond to the Equity Release Council’s Autumn Report with positive growth

Mark Gregory, Founder & CEO at Equity Release Supermarket

The Equity Release Council’s (ERC’s) Autumn report released today shows that average equity release rates fell below 5% for the first time to 4.91% in July 2019.

Equity Release Supermarket (ERS), one of the leading independent equity release advisory services have witnessed continued record growth in the first two months of Q3. They shed light on why the market has flattened out and why consumer demand is not to blame.

Growth figures published by Equity Release Supermarket showed that customer interest is still very much thriving. However, the ERC’s data highlighted that the number of new plans taken out in H1 19 was 6% greater than in H1 18 – but that lending was flat at £1.85bn vs £1.84 bn in H1 18. Equity Release Supermarket bucked this market trend in the first half of 2019 as new plans grew by 28% and lending by 17%.

Mark Gregory, Founder and CEO of Equity Release Supermarket, commented: “The market isn’t flat due to a shortage of customer interest – our figures prove that. What we are seeing is a slowdown from the two dominant players within the equity release brokerage market, causing a knock-on effect and impacting the wider market”

Consumers are now borrowing less year-on-year (YOY). Equity Release Supermarket reported their average case size to be 10% lower in H1 19 vs H1 18 – above the broader market reduction of 6%.

According to the advisory services company, this is due to two key factors; the London market and the macroeconomic outlook. The London market retracted from 10% to 8% YOY this year and given that property values in London are 103% of the national average, this undoubtedly affected total lending.

Strongest growth was seen in the North, reflecting the relatively buoyant housing market in the area. The North East share of equity release lending grew from 2% to 4% in H1 YOY, while in Yorkshire and Humberside lending grew from 6% to 7%.

With the average house price in the North East being the lowest in the UK at £130,888, along with Yorkshire and Humberside being the second lowest at £161,443 (ONS April 2019), this clearly impacted total lending and contributed to the number of new plans taken at Equity Release Supermarket, being 11% greater than lending.

The first two months of Q3 this year have seen a reverse in this trend with the London market growing by 1% and Equity Release Supermarket also reported that their average case value increased by 5%.

Mark added: “We believe this is due to the Brexit effect starting to wear off as people are now choosing to get on with life. It’s also in some part down to the recent fall in interest rates, with several lenders offering rates under 3%, which is attracting a higher-net-worth (HNW) customer to equity release.

“Lifetime mortgages offer a number of features that make them an attractive borrowing option for the HNW individual. The money released is tax-free, there are no credit or affordability checks to pass and lifetime mortgage balances can be effectively managed or reduced through combining an interest-only plan with the voluntary payment feature.”

The first two months of Q3 have seen continued record growth at Equity Release Supermarket, with YOY applications submitted to lenders up 22%.

Findings from Equity Release Supermarket also highlighted that the older generation are the fastest growing customer segment, suggesting that lifetime mortgages are being used increasingly as retirement planning tools. YOY, the 55-59 age group has fallen by 17%, the 60-64’s by 10%, whereas the 65-69 age group has increased by 18% and the 70-74s by 30%. The most popular age to take out equity release has now moved to 65-69, with 26% share – aligned with the ERC’s data where the average of a drawdown customer is 70.3 and 68 for a lump sum plan customer.

Mark concluded: “The growth we have seen in the equity release market in recent years has clearly not continued in the first half of 2019. The reasons for this are complex and include economic uncertainty impacting regional house prices – particularly in London. At Equity Release Supermarket, we haven’t been impacted like the wider market and have enjoyed record growth year on year. In the first two months of Q3, we are seeing encouraging shoots of growth in the London market, which is contributing to our continued success with our applications up 22% year on year.”