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Equity release market hits all-time high

Pensioners withdrew £5.8m a day from their homes last year, as growth in house prices boosted retirement incomes, according to analysis by Key Retirement.

The firm’s monitor showed the total value of property wealth released rose by 26% from £1.71bn for 2016 to a new record of £2.12bn. 

The number of homeowners using property wealth to enhance their retirement finances rose by 17% to around 27,666 compared with 23,747 in 2015.

Homeowners gained an average £77,877 each by using equity release, underlining the confidence in using property wealth for retirement planning.

Dean Mirfin, technical director at Key Retirement, commented: "The equity release market has broken through the £2 billion barrier for the first time and has more than doubled in value in just five years, highlighting how property wealth is making a huge contribution to retirement planning.

"The average amount being released by retired homeowners at nearly £78,000 underlines that property wealth can help with a number of issues for customers, ranging from improving their homes and going on holiday to helping family and clearing debt."

Key’s research reveals that around two-thirds (63%) of customers are using some or all of the cash released for home and garden improvements.
 
However, around a third (31%) are spending some of their property wealth on clearing loans or credit card debts, narrowly ahead of the 29% who use the money to fund holidays with 24% who are helping out family.
 
Mortgage repayment, which is expected to increase throughout 2017 and beyond due to the pressures of interest only maturities, accounted for 22% of customers’ use for funds released.
 
Mirfin added: "With more than one in five releasing equity from their homes are repaying mortgages and with 2017 being the start of the first major wave of interest only mortgage maturities we expect demand from those with a shortfall to repay the capital, or no means at all, to turn to equity release as a solution which will further drive demand.
 
"Rate cuts across the market and the launch of new solutions demonstrates that the market is responding to the growing need for alternatives to traditional retirement income solutions which are being squeezed by historically low interest rates."
 
Across the country seven out of 12 regions saw growth in the value of property wealth released with East Anglia recording the biggest increase at 67%, followed by a 43% rise in London, while the South East saw growth of 35% and Wales growth of 32%. The biggest fall in property wealth being released was 29% in Northern Ireland while the North West and Yorkshire & Humberside were only slightly lower.
 
East Anglia also recorded the highest increase in total plan sales at 47% followed by Wales on 37%. The East Midlands saw a 29% increase in plan sales during 2016.
 

Region

Number of plans sold 2016

Number of plans sold 2015

Total value released 2016 (£ million)

Total value released 2015  (£ million)

South East

7,451

5,938

£670,400,133

£496,039,774

London

3,081

2,412

£440,521,081

£308,323,135

South West

3,268

2,787

£240,538,562

£198,757,026

North West

2,323

2,399

£128,788,605

£130,316,638

East Anglia

2,004

1,360

£144,225,020

£86,344,969

East Midlands

2,201

1,704

£121,583,919

£95,084,320

West Midlands

2,007

1,634

£118,556,544

£94,979,236

Scotland

1,568

1,854

£86,584,205

£101,026,421

Yorkshire & Humberside

1,628

1,724

£88,528,759

£92,049,565

Wales

1,212

885

£66,636,650

£50,421,433

North East

723

792

£38,210,200

£44,172,304

Northern Ireland

200

257

£9,949,180

£14,082,239

UK

27,666

23,747

£2,154,522,866

£1,711,597,148

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