The increase in the popularity of equity release plans to supplement retirement income is no "flash in the pan" but part of sustained growth in the market, according to Key Retirement technical director Dean Mirfin.
His firm's latest ‘Market Monitor' report has found that total equity release product sales for the first nine months of the year have already passed nine-tenths (92%) of the total achieved in 2015.
The retirement planning specialist suggested this trend goes beyond the effects of Brexit and that its findings instead demonstrated a sustained growth in the equity release market.
As the following table shows, a regional focus case study of London included in the report found lending in equity release plans has seen year-on-year (YOY) growth in the third quarter for each of the last three years.
Half-year 2016 regional focus - London
|Period||Plan numbers||Change YOY||Lending||Change YOY|
Source: Key Retirement
Mirfin (pictured) said that while the average value released in London is higher than any other region, the research had identified a correlating trend around the UK. "This is not just a feature of 2016, it is a feature of market growth year-on-year, so we believe this trajectory is set to continue," he added.
"Increasingly, people are wanting to unlock the value in their properties. If you consider our regional case study, this surge shows not so much a Brexit effect but more that people are just as confident since before the vote in using their homes as a source of retirement income."
The report also found that more than £6.8m of property wealth was released every day by retired homeowners as the equity release market reached new heights post-Brexit. In total, more than £1.58bn of property wealth was released in the first nine months of this year compared with £1.71bn in the whole of 2015.
The report also flagged up how £633.8m of property wealth was released in this year's third quarter, compared with £470.9m in the same period in 2015. Homeowners gained an average £75,900 each by using equity release, it added.
In terms of how this additional money was being spent by consumers, 82% used some for home or garden improvements, 41% to clear credit card and loan debts, 34% to fund a holiday and 21% to pay off their mortgage.
No substitute for saving
In response to comments made by Bank of England chief economist Andy Haldane in August on the pensions v property debate, Mirfin said: "Investing in property as a commercial exercise and acting as a means to an end to fund retirement is something we wouldn't agree with in isolation.
"There is no substitute for retirement savings and relying on what a property may or may not be worth in the future does not necessarily answer that.
"Yet we do actually see that the pure economics of buying a house and the cost of doing that as well as fully funding a pension to the level of income you should have in retirement - it seems the two are always in conflict."
Mirfin saw this as a reflection of how much of the UK population have what might be deemed to be a sufficient pension income, adding: "The monetary pressure of paying a mortgage and saving into a pension means you cannot fully do both to the level you want at the same time."
Thus, while the market now sees some people directing more funds into pensions and others more into their homes, it will also increasingly see people using a combination of the two to fund retirement, said Mirfin. "In effect, neither of these is a substitute for the other," he added.
The Office for National Statistics has just released research highlighting that, while consumers consider an employer pension scheme the safest way to save for retirement, many believe they can make more money from property.
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