From wealthy homeowners to the aging population: here’s what’s driving the equity release recovery
The latest report from the Equity Release Council shows the equity release market is returning to normality. Our Later life finance expert David Forsdyke looks at the factors driving the recovery
Many of the real estate sectors quickly returning to normality in the wake of the pandemic have long-term demographic shifts underpinning them.
That’s why rent collection in the purpose-built rental sector remains robust, for example, as high house prices in global cities mean more people are renting for longer.
The equity release market is also linked to long-term demographic shifts as people live longer and final salary pensions become increasingly rare. Those trends, alongside a wider financial planning rethink underway among wealthier older homeowners, are driving a recovery in the equity release market.
The number of plans agreed increased by 41% to 10,351 in the third quarter, though that remains down about 9% on the same quarter a year earlier, according to Equity Release Council data.
But in recent weeks when speaking with clients it’s clear that wealthier homeowners are also reassessing their finances following long periods of lockdown & limited social interaction.
My clients tell me the pandemic has made them feel a little more vulnerable and as a result we’ve seen increasing interest among homeowners interested in organising their financial affairs, including for estate and inheritance tax planning.
Where they can afford to, it’s clear there’s also a desire to help family who might be struggling financially due to the economic impact of the pandemic.
The cost of equity release products has declined at an opportune moment, and average rates reached record lows of 4.11% in July 2020, with over half of products offering a rate of 4% or lower, and a fifth offering rates below 3%.
If you’re interested in discussing equity release products, or would like a more informal chat about your finances, please get in touch.