Research by Canada Life reveals that, in 2020, almost 2 in 5 (38%) financial advisers expect their clients to be younger in age, while more than 1 in 5 (21%) expect the size of loans to increase.
The predictions come after a strong year for the Equity Release market, where £2.84 billion was lent by the end of the third quarter of 2019. The market was boosted by a drop in average interest rates for the product to 4.91% in July 2019, the first time average rates have dipped below 5%.
Advisers expect 2020 will be another strong year for the sector, with the majority predicting the market will exceed the £5 billion mark. This growth will largely be driven by people wanting to gift to their family, selected by 59% as the most likely reason to take out equity release.
Alice Watson, head of Insurance marketing at Canada Life said:
“Equity release products have grown in popularity, almost since their inception. As the market grows and matures, home finance options are becoming a key source of retirement income for many retirees, particularly for supporting their families.
“An important way in which people can support their families is by helping the younger generations to get on the property ladder. With house prices continuing to rise, it’s likely that more retirees will want to help their children and grandchildren in this way. Equity release allows them to use the value in their property to do this, whilst staying in their own home. The fact that clients are expected to be younger next year is likely linked to over 55s looking to help family by giving an early inheritance.”
As well as using the money to gift to children, the demand for bigger loans could also be linked to a need among clients in or approaching retirement to use equity release to help with the cost of care. Among advisers, 8% predict that needing to fund the cost of care will be a main driver of equity release demand in 2020.
Alice Watson adds:
“We know that nearly 14 million people plan to remain in their current home in retirement. Over the last year, clients have been using equity release to either fund home improvements so that they can continue living in their house, or for at home care. As people choose to age in place, it’s important that they can adapt their home to meet their changing needs.
“While we await the Government’s social care green paper, it’s likely that more people will consider how they can use equity release to ensure they are able to enjoy a comfortable retirement, in their own home.”