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Equity Release sees big increase in 2021

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Equity Release market boosted by increased size of loans

The Equity Release market in H1 2021 showed a considerable increase in the amount of money borrowed and the average amount released. The amount of new equity released rose 32% to £1.94 billion from £1.47 billion in H1 2020 whilst the average customer took out £94,982 (up 34% from £74,014 in H1 2020). At Ocean Equity Release, we have certainly noticed this massive increase over the past six months.

Largest Equity Release enquiry ever

When one of our team Nadine ran into my office last month with an excited look on her face saying,

‘I have a lady on the phone who wants to borrow £7 million’, half of me thought it was a wind up.

I took the call and spoke to a lovely lady who lived in a £25 million property and had a first charge mortgage coming to the end of its term later this year and a second charge loan which expired next year.

The well-worn phrase ‘property rich and cash poor’ could have been created for this lady and her husband. They had a fantastic home which they had lived in for many years but no assets and limited income. No residential lender would look at this case, however, several Lifetime Mortgage lenders were keen to speak with their funders to see if they could help.

As the clients had lived in the property for many years, loved the location, land and gorgeous home they had built, they really did not want to downsize. At the time of writing, I am still awaiting two lenders to come back to me once their funders have considered the application.

Ocean Equity Release good reputation

Ocean Equity Release has always had a good reputation in the industry so higher net worth clients do tend to approach us. In fact, our average loan has always been around £200,000. Due to the high demand in new enquiries, we are seeing across the country, we have started a new company ‘The Equity Release Lady’ to sit alongside Ocean Equity Release to cope with high demand. The companies will both operate a ‘franchise’ model which means that wherever clients live, they will be able to get advice from a qualified advisor supported by the Ocean team.

The demand for Lifetime Mortgages at the upper end of the market is growing rapidly and with IFAs increasingly considering the client’s property value as part of their holistic advice, this will only increase. We have never known so many Lifetime Mortgage enquiries where the client’s property value was as high as they have been this year, or where they wanted to borrow as much.

Many large cases

Cases this year have seen clients want to borrow £1.4 million, £703,000, £700,000 (All clients remortgaging at mortgage deal end) as well as purchases using loans of £337,000 and £314,000 as well as a £330,000 loan for payment as part of a divorce settlement. Reasons for borrowing are varied but increasingly high-value remortgages, IHT planning, and divorce settlements are featured amongst the reasons.

The future looks bright for the Lifetime Mortgage industry; however, it does seem that the higher the loan amount, the more difficult it is to place. As lending for Equity Release is based on Loan to Values and funders are quite risk-averse, finding the right deal for these mega loans can prove quite tough. With less than ten Lifetime Mortgage lenders operating currently, although the number of available products numbers has increased, more flexibility and an ability to underwrite each case on its own merits will become crucial for this growth to continue.

All figures from Key’s 2021 Market Monitor

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