UK Equity Release Market Monitor Q3 2016 Embargoed until 00:01 15th October 2016 Key Retirement, Baines House, 4 Midgery Court, Fulwood, Preston PR2 9ZH All images contained within this report can be provided upon request. Email press.office@keyretirement.co.uk 1
02 03 04 05 06 08 Contents INTRODUCTION Dean Mirfin, Key Retirement EQUITY RELEASE MARKET MONITOR Q3 2016 Results EQUITY RELEASE MARKET HIGHLIGHTS Popular Uses Quarter 3 2016 Focus - Repaying Debts EQUITY RELEASE MARKET HIGHLIGHTS Regional Summary Focus London REVIEW Number of Plans Value of Plans ANALYSIS Customers By Age Customers By Status Product Mix Key Retirement s Market Monitor provides a quarterly, half yearly and annual review of the UK s equity release market. The Monitor provides journalists and other industry stakeholders with detailed data on the market alongside historical comparisons. Key is the leading over 55 s specialist adviser and the UK s number 1 equity release specialist; arranging over 35% of all Equity Release Council (ERC)[1] lending in the UK. The Monitor uses Key s data to reflect the market as a whole and provides the most detailed analysis of the equity release sector, including: Usage trends Age analysis Regional analysis based on - - Plan numbers - Plan values - Property prices The Monitor focuses on a particular region and also a specific usage driver for releasing equity in each edition. Quarter 3 2016 focus Repaying debts Regional focus London For further details contact: Dean Mirfin Technical Director KR Group Email dean.mirfin@krgroup.co.uk Telephone 07879 678737 Press office [1] Equity Release Council (ERC) is the equity release trade organisation representing the Equity Release Sector 2
Quarter 3 2016 Results New plan numbers Total amount released 36% 21% 8,348 33% 633.8m 24% Lump sum releases account for 36% of all plans 21% are clearing mortgage debt The Quarter 3 2016 report reveals the highest recorded year on year quarterly growth, both for the number of new plans and for overall lending. This result shows a strong maintained growth established in the first half of this year. Sales of plans for the 3rd quarter of the year were 8,348 from 6,297 for the same period of 2015, an increase of 33%, whilst lending increased to 633.8 million for the period, from 470.9 million in the third quarter of 2015, an increase of 35%. The average loan amount has increased slightly over the period rising from 74,788 to 75,921. Drawdown remains the most popular type of plan accounting for 63% of all new plans (Drawdown and Enhanced Drawdown). Drawdown, which retains accessible further funds, provides potential further borrowing of 222 million in addition to the 633.8 million in initial advances; giving a total market for quarter 3 of 856 million, compared to the total of 622 million for the same period of 2015. Lump sum releases have continued to increase accounting for 36% of new business compared to 34% for the same period of 2015. The average age for those releasing equity was 71 remaining unchanged against the same period of 2015. Biggest movers by region Number of Plans Lending West Midlands +59% East Midlands +54% East Anglia +53% Scotland -13% North West -3% Regional Highlights 10 out of 12 regions across the country experienced growth in the total number of plans, with 9 out of the 12 regions experiencing growth in total lending. The greatest increases in plan numbers were experienced across the Midlands and East Anglia; the West and East Midlands achieving growth in numbers of 59% and 54% respectively, and East Anglia 53%. The Midlands also experienced the greatest increases for overall lending with the West Midlands achieving growth of 67% and the East Midlands achieving growth of 50%, closely followed by London with growth of 48%. Top region for overall lending was the South East ( 195.5m) with London ( 130.1m) taking second place. The largest drop, for both plan numbers and overall lending, was experienced in Scotland, falling 13% and 18% respectively. West Midlands +67% East Midlands +50% London +48% Scotland -18% Northern Ireland -3% North West -2% 3
82% Home and/ or garden improvements 41% 34% Pay debts (e.g. loans, credit cards) Go on holiday 21% Clear outstanding mortgage 19% Treat or help family or friends 13% Help with regular bills Highlights 82% released equity for home and/or garden improvements 41% used equity release to pay debts Quarter 4 2016 Focus Repaying Debts Quarter 3 has revealed a considerable increase in the number of people releasing equity from their homes to repay non-mortgage debts. 30% repaid debts in quarter 3 of 2015, increasing to 41% for the same period this year. The most popular debts repaid are credit cards, followed by loans and overdrafts. Credit card debt poses a huge drain on retirement finances and we see repeated trends in the levels of debt on cards increasing as customers age, showing that for many debt in retirement without access to equity release is a one way street. As we continue through our retirement years many accumulate debt rather than become debt free. Our debt report published earlier this year revealed that the average credit card balance among those releasing equity was 10,010. 4
Regional Summary Area Value Percentage Change 2016 on 2015 Number of Plans Percentage Change 2016 on 2015 Average Value Released Average LTV % Average Customer Age Average Property Value YOY Var East Anglia 40.7m 47% 544 53% 74,871 29 72 261,469 15% East Midlands 37.9m 50% 679 54% 55,888 27 71 210,541 6% London 130.1m 48% 957 43% 135,886 23 71 602,920-3% North East 11m 3% 213 17% 51,811 27 72 190,815 9% North West 38.1m -2% 702-3% 54,239 27 70 200,273 8% Northern Ireland 2.9m -3% 66 0% 44,380 22 71 200,200 53% Scotland 23.9m -18% 449-13% 53,172 28 71 191,796 13% South East 195.5m 38% 2,302 41% 84,955 23 71 363,085 12% South West 76m 39% 1,026 42% 74,044 25 70 292,188 9% Wales 17.3m 29% 311 37% 55,613 28 71 196,958-1% West Midlands 34.9m 67% 620 59% 56,260 26 71 217,799 13% Yorkshire & Humberside 25.4m 47% 479 27% 53,033 27 71 199,438 17% Total 633.8m 35% 8,348 33% 75,922 25 71 307,900 11% Regional Focus London Total lending 130.1m Plans arranged 957 Average released 135,886 Average property value 602,920 Half Year 2016 Regional Focus London The average value released in London is 135,886, dwarfing all other regions, with the South East coming closest with an average of 84,955. The region s appetite for equity release has grown dramatically, not just in the third quarter of this year, but over the past few years. Plan numbers and lending for previous 3rd quarters have been: Period Plan Numbers Change YOY Lending Change YOY Q3 2014 551-4.34% 76,237,450 +34.86% Q3 2015 669 +21.42% 87,636,938 +14.95% Q3 2016 957 +43.05% 130,094,578 +48.45% While London leads the way in terms of average release amount, the good news for homeowners in the city is that achieving such a high average release is only utilising an average 23% loan to value. 5
Number of equity release plans Q3 2016 Area Q3 2016 NUMBER OF PLANS Q3 2015 % change 1 South East 2302 1628 41.4% 2 South West 1026 721 42.4% 3 London 957 669 43.1% 4 North West 702 724-3.1% 5 East Midlands 679 441 53.8% 6 West Midlands 620 390 59% 7 East Anglia 544 355 53.2% 8 Yorkshire & Humberside 479 376 27.4% 9 Scotland 449 517-13.2% 10 Wales 311 228 36.9% 11 North East 213 183 16.6% 12 Northern Ireland 66 66 0.1% TOTAL 8348 6297 32.6% Review Highest South East (2,302) 9 Lowest Northern Ireland (66) 11 12 8 4 5 6 7 10 3 2 1 6
Value of equity release plans Q3 2016 Area Q3 2016 NUMBER OF PLANS Q3 2015 % change 1 South East 195.5m 142m 37.7% 2 London 130.1m 87.6m 48.4% 3 South West 76m 54.7m 38.8% 4 East Anglia 40.7m 27.7m 47.4% 5 North West 38.1m 39m -2.4% 6 East Midlands 37.9m 25.4m 49.6% 7 West Midlands 34.9m 20.9m 66.8% 8 Yorkshire & Humberside 25.4m 17.2m 47.3% 9 Scotland 23.9m 29.3m -18.4% 10 Wales 17.3m 13.4m 29.2% 11 North East 11m 10.7m 3% 12 Northern Ireland 2.9m 3m -2.9% TOTAL 633.8m 470.9m 34.6% Review Highest South East ( 195.5m) 9 Lowest Northern Ireland ( 2.9m) 11 12 8 5 6 7 4 10 2 3 1 7
Analysis Average age 71 64% of those releasing equity are couples, from 62% in 2015 25% of those releasing equity are single women, more than double the number of single men Customers by age 27% 28% 17% 13% 9% 4% 2% 55-59 60-64 65-69 70-74 75-79 80-84 85+ Customers by status 64% 25% 10% Couple Single Female Single Male Product mix 55% 25% 0% 8.5% 11% Reversion Enhanced Drawdown Enhanced Lifetime Mortgage Lifetime Mortgage Drawdown 8