Over half of UK homeowners change equity release plans amid coronavirus pandemic

Over half of UK homeowners change equity release plans amid coronavirus pandemic main image

Coronavirus has impacted virtually every aspect of our lives. The way we work, shop, socialise and manage our finances. After a brief period of normality following the drawn out Brexit saga, covid-19 has brought another wave of uncertainty to UK homeowners.

So in a bid to understand how the pandemic is affecting the financial decisions over 50s make, we conducted a survey on homeowners who had previously expressed an interest in releasing equity from their home.

With over 50% of those surveyed changing their direction on equity release, there’s no denying our plans for the future are still uncertain.

What did the equity release covid-19 survey say?

On the 17th March 2020 the survey asked 2,151 UK homeowners interested in equity release one simple question – ‘whether coronavirus had affected their decision to release equity from their home’.

Whilst 17% said they were no longer considering releasing equity as a direct result of the pandemic, a further 34% of those surveyed were putting plans on hold.

Given the unprecedented impact coronavirus has had on the world, it’s not surprising such a large percentage of people have had a change of heart when it comes to unlocking equity from their home. However, at such a volatile time for the stock market and the impact on pensions, savings and investments, equity release could become a vital source of income for many UK households going forward.

How has coronavirus affected equity release?

Whilst coronavirus has affected the decisions of some UK households, 49% of those surveyed said the pandemic had had no impact on their decision. However, these homeowners will undoubtedly face changes to the way their lifetime mortgage application is processed if they choose to go ahead.

Like all businesses, equity release providers have had to adapt their business practices in line with the government’s guidelines on social distancing. With few face to face visits taking place, most of the work required to arrange a lifetime mortgage is now done over the phone or via video link.

Home valuations have changed to semi-automated desk-top and drive by valuations and solicitors’ visits for signatures are no longer required during this period, although they will still ensure that all the legal paperwork is taken care of. The result is a delay in the usual 6 to 8 weeks it usually takes to release equity from you home.

In addition, in the same way that some homeowners are managing their financial affairs more carefully, lenders have become more cautious too. Some equity release providers have reduced the size of the loans available or lowered the maximum loan to value, whilst others have withdrawn products from the market altogether.

And although we were seeing some of the lowest equity release interest rates to date, these have crept up slightly in reaction to the virus. Having said that there are still deals available, so if you’re considering releasing equity from your home, it’s important to speak to a qualified equity release specialist who can compare equity release schemes across a range of leading UK lenders.

What does the Equity Release Council say about demand for equity release?

According to the newly released Equity Release Council’s Q1 report, 2020 was set to be a booming year for equity release. After an uncertain 2019, the first 3 months of the year saw £1.06bn of property wealth accessed via equity release. An uplift of 14% compared to Q1 2019.

And with 11,079 new plans arranged, the first part of the year proved to be the highest of any Q1 period to date. There were even indications that 2020 Q1 would break the £1.08bn record of Q4 2018, however business slowed from mid-March onwards as social distancing measures were imposed.

So, after the upheaval of Brexit, equity release is clearly growing as a mainstream later life financial option for the over 55s. When you consider that over 55s make up 30% of the population and 56% of UK homeowners, the future looks bright for equity release. Well, perhaps once we have some certainty back in our lives again anyway.  

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