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Coronavirus changing equity release consumer behaviour

  • Requests for loans to clear existing mortgage dropped by 10% in first three months of lockdown
  • Paying for holidays also drops by 5% in Q2
  • Home improvements maintains number 1 position as most popular reason for loan in H1

The first three months of lockdown saw changing behaviour among equity release customers according to analysis by Canada Life.

The data, based on Canada Life’s customer information for H1 2020 shows early signs of changes in behaviour between Q1 and Q2, when lockdown measures were most severe. Unsurprisingly given the restrictions on international travel we can see a 5% drop in requests for lifetime mortgages to pay for a holiday when compared to the first three months of the year. However, requests for loans to support day-to-day living grew by 5% to account for over a fifth (22%) of equity release applications in Q2. Alongside this, generosity amongst family and friends also appears to have increased over lockdown as releasing equity to gift to family or friends, or to help family get on the property ladder, have both enjoyed slight increases in Q2 by 3% (to 18%) and 1% (to 4%) respectively.

Interestingly, the percentage of requests being made to clear existing mortgages has dropped by 10% in the last three months when compared to the first quarter of the year. This may be down to the Government’s coronavirus policies and people opting to take a mortgage payment holiday instead of clearing the outstanding balance in full.

Funding home improvements has continued to be the most popular reason to take out a lifetime mortgage accounting for two-fifths (39%) of all requests over the six month period, with just a 1% increase between Q1 and Q2. Requests to fund home adaptations, to make a home safer or more comfortable have also increased by two per cent to account for nine per cent of applications in the last three months.

Alice Watson, head of marketing, Insurance, Canada Life, said:

“With coronavirus transforming the world in a matter of months and turning many lives upside-down, it’s unsurprising that many are looking to release equity for different reasons than before. Over the last six months and in Q2 especially we can see that equity release has been used less as a means to fund the ‘once in a lifetime’ experiences and more as a way to support family members or day-to-day living expenses. As we enter in to a period of increased economic insecurity I wouldn’t be surprised if this shift became more pronounced.

“As lockdown measures start to lift it will be interesting to see what effect this has on consumer behaviour. The full impact of coronavirus is still unknown, but the global pandemic has proved that the industry can rise to any challenge. Over the last few months alone, the market has demonstrated its resilience by adjusting to new ways of working and embracing technology and I’m confident that the market will continue to pull together to deliver solutions for advisers and their clients.”