The Equity Release Market is Tipped for Major Growth in 2021

Independent brokers and financial advisors across the country are projecting a successful year ahead for the equity release market. With interest among customers having remained surprisingly high throughout 2020, even in the face of major economic uncertainty, three-quarters of experts anticipate significant market growth over the next 12 months.

Specifically, new data published by Canada Life suggests that many financial advisors anticipate the value of the equity release market to exceed £6 billion in 2021 for the first time.

Modest yet reassuring gains

The figures from Canada Life suggest that around 42% of financial advisors experienced growth in their equity release activities during 2020. While this is not particularly impressive growth, it is nonetheless reassuring given the financial impact and uncertainty of the COVID-19 pandemic.

Many had expected the market to grind to a complete halt, when in reality it remained ‘business as usual’ for a surprising proportion of lenders.

As a result, 62% of advisors now believe that the equity release market will be operating at pre-lockdown levels by the end of the second quarter next year. It’s also widely predicted that the market’s performance will continue to accelerate indefinitely as more people than ever before express an interest in equity releases.

Changing priorities and purchase intent

Meanwhile, Canada Life’s figures indicate a series of interesting shifts in how those planning to release equity in their homes intend to allocate the funds raised. Evidence also suggests that the average equity release customer age in the UK will also reduce: 50% of advisors predict a spike in popularity among younger homeowners next year.

45% of experts also see more equity release customers applying for bigger loans, releasing much larger proportions of the equity tied up in their homes.

As for the allocation of the funds, 70% of advisors predict that their customers will give portions of the proceeds to their children or grandchildren next year. 65% see equity release funds being used to pay off debts, marking a slight reduction from the 71% recorded in 2020.

The primary motivations among equity release customers for leveraging the money tied up in their homes are expected to remain the same next year. These include paying off the debt during retirement, concerns regarding insufficient pension savings, and the ongoing volatility of the stock market. Get help working out the costs of paying a mortgage using our UK mortgage calculator.

In addition, the impact of COVID-19 on people’s finances, income, and long-term financial stability is also likely to influence decisions regarding equity release.

“There is no doubt 2020 has been challenging for many reasons, but it is great to see so much positivity looking forward to next year,” commented Alice Watson, Head of Marketing at Canada Life.

“Advisors are clearly anticipating a growth in demand driven by both improved awareness of equity release and families reassessing their finances in light of the pandemic. Predictions around a shift in customer age and an increase in loan size point to a move in how homeowners view their home as a financial asset, much like pensions or ISAs.”

“The world is changing around us, but closer to home, we need to consider how best to use our overall wealth to provide the secure financial futures we seek. Advisors are best placed to show clients how to plan for that future.”