"Equity release market activity continued to mirror wider economic conditions, with the confidence of early 2020 giving way to caution"
Its figures show that £698m of property wealth was accessed by older homeowners in Q2 2020, down by 34% – almost £400m – from the previous quarter.
The number of new equity release plans agreed between April and June also declined by 34% from 11,079 in Q1 2020 to 7,341 - the lowest seen in any quarter in the last four years. May was the quietest month for new plans, before initial signs of recovery followed in June as lockdown conditions began to ease.
The fall reflected wider lending trends – Bank of England data for April and May shows gross lending secured on dwellings was down 36% from February and March.
Among the 3,328 new lump sum lifetime mortgages taken out (down 31% from the previous quarter), the average loan size dipped below £100,000 for the first time since Q3 2019 to to £99,959.
Q2 2020 saw 5,608 customers returning to take extra drawdowns from their agreed reserves, compared to 9,805 in the previous quarter, as people exercised caution before making use of the option to access further funds. This is a 43% decrease from Q1 to Q2, compared with the 34% decrease in new customers served.
Further advance activity was also considerably quieter, with just 668 existing customers agreeing additional funds – the lowest number since Q1 2017.
David Burrowes, chairman of the Equity Release Council, commented: "Equity release market activity continued to mirror wider economic conditions, with the confidence of early 2020 giving way to caution as households assess the impact of coronavirus on everyday life.
"Careful precautions have kept the market open to those who wish to choose the option of equity release and ensured customers have access to property wealth to help meet important financial and social needs. That said, the fall in the number of new plans and fewer returning customers accessing extra funds are clear signs of people pausing to see how the wider situation unfolds.
"Property assets have long been one of the nation's main sources of wealth and are likely to play an increasingly important role to support people when addressing the challenges facing many in later life, including bridging the savings gap for older homeowners who are asset rich but cash poor. Releasing equity is not a suitable choice for everyone, and our focus is on ensuring customers' interests are protected at every stage of the process through structured financial advice, independent legal advice and clear product safeguards."
