Table of Contents
Executive Summary
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- The market
- Equity release lending nearly hits £4 billion in 2018
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- Figure 1: Forecast value of new equity release schemes sold, 2013-23
- Companies and brands
- Legal & General maintains its dominance
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- Figure 2: Equity release market share, by percentage of new sales values, 2017 and 2018
- Surging market growth boosts product development activity
- Adspend nearly doubles in 2018/19
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- Figure 3: Total above-the line, online display and direct mail advertising expenditure on equity release, Year to end of February, 2015-19
- The consumer
- Just 1% of those aged 45+ use or plan to use equity release
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- Figure 4: Expected/actual sources of retirement income, 2018 and 2019
- Two in five describe their financial situation at retirement age as healthy
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- Figure 5: Financial situation at retirement age, February 2019
- Interest in equity release falls to a new low in 2019
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- Figure 6: Consideration of equity release, February 2019
- One third of homeowners claim a good understanding of equity release
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- Figure 7: Familiarity with equity release, February 2019
- Many still have misconceptions about equity release
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- Figure 8: Equity release product knowledge, February 2019
- Obtaining a lump sum payment is most likely to be viewed as a key benefit
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- Figure 9: Perceived benefits of equity release, February 2019
- Equity release still widely viewed as a last-ditch option
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- Figure 10: Agreement with statements about equity release, February 2019
- What we think
Issues and Insights
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- Lack of knowledge a key factor hindering interest in equity release
- The facts
- The implications
- Equity release – a supplement to poor annuity rates
- The facts
- The implications
The Market – What You Need to Know
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- Equity release sales near the £4 billion mark in 2018
- 65% of new business is driven by drawdown plans
- Average drawdown plan values stagnate while lump-sums decline
- House price growth has slowed to a six-year low
- PRA delays introducing new equity-release regulation by one year
Market Size and Forecast
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- Equity sales reach £3.9 billion in 2018…
- …but growth slows as housing market stalls
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- Figure 11: New sales of equity release products, by volume and value, 2012-18
- Healthy growth expected to continue over the next five years
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- Figure 12: Forecast value of new equity release schemes sold, 2013-23
- Figure 13: Forecast volume of new equity release schemes sold, 2013-23
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- Figure 14: Forecast value and volume of new equity release schemes sold, 2018-23
- Forecast methodology
Market Segmentation
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- 56% of all equity release market activity driven by new sales
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- Figure 15: Volume of equity release customers by type of activity, 2017-18
- Drawdown accounts for two thirds of new business volumes
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- Figure 16: Proportional distribution of new equity release sales, by product type, 2013-18
- Average lump-sum value falls to lowest level in two years
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- Figure 17: Average amount released by product type, H1 2017-H2 2018
Market Drivers
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- Greying of UK population working in the favour or equity release
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- Figure 18: Expectation of life for those aged 65 in each year, period principal projection, UK, 1981-2066
- Annual house price growth has slowed to a 6-year low
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- Figure 19: Average house prices in the UK, by country, January 2006-January 2019
- Homeownership is in decline among over-45s…
- …but more people are taking mortgage debt into retirement
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- Figure 20: Housing tenure, by age of household reference person, England data 2008/09 and 2017/18
- The number of equity release deals available has expanded rapidly
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- Figure 21: Number of equity release deals and select details about rates and fees, February 2014-February 2019
Regulatory and Legislative Changes
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- PRA postpones introduction of new equity release regulation
- Retirement interest-only mortgages reclassified as standard mortgages
- Pensions Dashboards set to become available in 2019
Companies and Brands – What You Need to Know
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- Market share dominance of top players in decline
- Surging market growth boosts product development activity
- Equity release above the line adspend rises sharply
Market Share
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- ‘Big three’ lenders’ grip on the market is loosening
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- Figure 22: Equity release market share, by percentage of new sales values, 2017 and 2018
- Legal & General the market leader with over £1 billion in lending in 2018
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- Figure 23: Equity release market share, by value of top provider new sales, 2013-17
Competitive Strategies
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- Rapid market growth has led to a flurry of new product launches
- Well-known brands helping move equity release into mainstream
- Standard Life partners with Age Partnership to re-enter the market
- Openwork pilots a new lifetime mortgage product
- Legal & General planning an in-house equity release advice service
- Pure Retirement allies with Nationwide on origination and servicing
- Enhanced flexibility and control the key goal of product development
- L&G incorporates greater flexibility into its product line-up, including monthly income option
- Saga launches new Regular Drawdown Lifetime Mortgage
- Just introduces plan with option to reduce roll up of interest
- Responsible Lending plan encourages more efficient drawdown activity
- OneFamily partners with US firm to launch high LTV lifetime mortgage
- Canada Life introduces new plan with enhanced flexibility
- Aviva bolsters its equity release offering
Advertising and Marketing Activity
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- Above the line adspend skyrockets
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- Figure 24: Total above-the line, online display and direct mail advertising expenditure on equity release, Year to end of February, 2015-19
- Key Retirement is the leading advertiser
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- Figure 25: Top five advertisers of above-the line, online display and direct mail advertising expenditure on equity release, Year to end of February, 2017-19
- TV advertising accounts for two-fifths of adspend
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- Figure 26: Total above-the-line, online display and direct mail advertising expenditure on equity release, by media type, Year to end of February 2019
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Just 1% of over-45s use or plan to use equity release
- Two fifths describe their financial situation in retirement as healthy
- Just one in 10 homeowners would consider equity release
- One in three claims to have a good understanding of equity release
- More still needs to be done to fight against product misconceptions
- The ability to extract lump sum payment most commonly cited benefit
- Many still view equity release as an option of last resort
Sources of Retirement Income
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- Only 1% of over-45s use or expect to use equity release
- Property is not widely associated with retirement planning
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- Figure 27: Expected/actual sources of retirement income, 2016-19
- Most use or plan to use just one or two retirement funding resources
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- Figure 28: Repertoire of expected/actual sources of income, February 2019
Financial Confidence in Retirement
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- Two in five describe their retirement finances as healthy
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- Figure 29: Financial situation at retirement age, February 2019
- Owning property gives people a back-up plan and boosts confidence
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- Figure 30: Financial situation at retirement age, by housing situation, February 2019
- Under-65s are the least confident
Consideration of Equity Release
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- Consideration drops as only one in 10 homeowners says they are open to equity release
- Uncertainty about house prices undermines confidence
- Disconnect between intentions and reality
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- Figure 31: Consideration of equity release, 2015- 2019
- Those with children more open to equity release
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- Figure 32: Consideration of equity release, by presence of children, 2015- 19
Familiarity with Equity Release
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- A third claim to have a good understanding of equity release
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- Figure 33: Familiarity with equity release, February 2019
- Few homeowners have sought professional retirement planning advice
Equity Release Product Knowledge
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- Widespread knowledge about key features is still lacking
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- Figure 34: Equity release product knowledge, February 2019
- Familiarity helps boost product knowledge, but misconceptions remain
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- Figure 35: Equity release product knowledge, by familiarity with equity release, February 2019
Perceived Benefits of Equity Release
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- Lump sum payment most commonly viewed benefit of equity release…
- …but one in five highlights option for regular income
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- Figure 36: Perceived benefits of equity release, February 2019
- Funding long-term care and helping family top uses of funds
Attitudes towards Equity Release
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- Half of homeowners think equity release is an option of last resort
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- Figure 37: Agreement with statements about equity release, February 2019
- Younger homeowners tend to have more favourable views
- Equity-release success stories can help improve product perception
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- Figure 38: Agreement with statements about equity release, by familiarity with equity release, February 2019
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Additional best-case/worst-case forecast tables
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- Figure 39: Best- and worst-case forecast for the value of new equity release schemes sold, 2018-23
- Figure 40: Best- and worst-case forecast for the volume of new equity release schemes sold, 2018-23
- Forecast methodology
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