Why Does the Equity Release Industry Look Set to Boom This Year?
Today I have the first in a series of three collaborative posts on the subject of equity release. This one examines the growing popularity of equity release and why it looks set to boom in the year ahead.
The equity release industry saw a massive expansion in 2021, with a record-breaking sum of over £4.8 billion being unlocked by retirees across the UK. This unprecedented growth has been welcomed amid a global pandemic, as the Equity Release Council helps regulate a retirement product that has given many retirees the means to a desperately needed income in these tough economic times.
Mark Patterson, the equity release expert from EveryInvestor, joins the ranks of fellow industry authorities in predicting that 2022 is set to be another record-breaking year. Let’s take a look at what’s expected and determine if unlocking equity is a good idea over the next few months.
Table of Contents
What Is Equity Release?
Equity release is a widely popular financial product for UK-based homeowners older than 55. In a nutshell, it gives you the opportunity to use your property’s equity but still live at home. With a third of UK retirees having less than £10,000 in retirement savings, equity release offers a lifeline to many. What’s more, the money can be used for any purpose.
According to figures from the Equity Release Council (ERC), equity release clients borrowed a total of £4.8 billion last year, a 24% rise on 2020’s figure.
Why is the Equity Release Industry Growing Amid a Tough Economy?
While many industries have crumbled in the wake of Covid 19, the equity release sector has grown tremendously. This is for several reasons, including:
- Equity release provides financial security in a tough economic time.
- The Equity Release Council has made the industry safe and is shifting a historically bad reputation.
- Interest rates hit an all-time low in March 2021, and homeowners have received the best deals yet, with fixed-for-life interest rates.
- Finally, growth inspires growth. As the industry expands, lenders offer more flexible products with bonus features, such as a free valuation or no completion fee.
What’s Predicted for 2022?
The future of equity release looks bright in 2022, and 80% of experts predict growth, with some believing this will be vastly beyond regular inflation. There are some key industry features that are likely to impact the industry (1).
First, the Equity Release Council announced on 31 January 2022 that all equity release lenders must offer the opportunity for voluntary loan and interest repayments. This announcement is welcome for potential borrowers, as voluntary repayments can vastly reduce the cost of your loan, yet there’s no obligation or risk of foreclosure.
On a slightly less positive note, equity release interest rates will rise in 2022 and should continue to do so until 2024. However, this could actually mean further industry growth. Rates are set to rise only slightly, and homeowners applying now will likely begin their equity release plans before we see any further increases.
Should I Unlock Equity from My Home at This Time?
With the market as it stands, it is a good idea to unlock equity if you’ve been planning to do so. However, it’s more complicated than just looking at the state of the industry.
Whether or not you should unlock equity from your home will depend on your personal circumstances and stage of life. What’s great is that equity release is safe; it’s overseen by the Equity Release Council and regulated by the Financial Conduct Authority (FCA).
However, to determine if it’s a good idea to unlock equity from your home, you should speak to a financial adviser. After all, seeking advice is compulsory when opting for an equity release product. The team at EveryInvestor will always encourage a whole-market financial adviser as they have an overview of the whole equity release market.
In Conclusion
Between flexible plans, the opportunity for voluntary repayments, and interest rates still low, now is a great time to release your property value through equity release. With another record-breaking year ahead of us, the industry is booming, and many more retirees are set to sign up to an equity release plan. Could you be next?
This is a collaborative post.