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, experts predict 2021 will be a good year for the equity release market, as borrowers making plans for later life regain confidence and demand grows.
What happened in 2020?
2020 was a difficult time for many businesses in the financial services sector. After a strong start to the year with record sales in Q1, demand for equity release fell in Q2 as the nation came to grips with the pandemic.
But as lockdown eased and the industry put covid safe measures in place to protect staff and customers alike, pent up demand saw lending increase, resulting in a busy end to the year.
The overall result was a 10% drop in sales compared to the previous year. However, the promising end to 2020 indicates a resilient market that is rebounding quickly. A market that is expected to exceed pre-covid levels by the end of 2021.
What do the experts say?
In a recent survey by Canada Life, 73% of advisers said they expected the equity release market to grow in 2021. The main factors driving demand for lifetime mortgage products were ‘an increase in consumer comfort and awareness’ which accounted for 59% of those surveyed, ‘the impact of covid’ at 58% and ‘insufficient pension pots’ at 50%.
In addition to market growth, experts also predict that customers will be younger and loan sizes higher. It appears that homeowners attitudes are changing, viewing equity release as an important financial tool for boosting finances and retirement income.
Reporting on the previous year, the Equity Release Council highlighted that although the percentage of customers taking drawdown mortgages had dipped slightly, lump sum lifetime mortgages saw its largest share of activity since 2009.
They added that 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.
Is 2021 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 2021 have choices. They can choose to repay some or all of the interest on a regular or adhoc 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 capitol.
Plus, with equity release interest rates at an all time low and the growth in property prices high, 2021 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.