Month: December 2020

Equity release uptake climbs back towards pre COVID levels

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Q3 2020 equity release market statistics released by the Equity Release Council show a positive upturn. The number of new equity release plans agreed (10,351) increased by 41% from the previous quarter as national lockdown restrictions were eased across the UK.

Equity release allows individuals aged 55 and over to release money from the property they live in without having to make monthly payments.

There was a steady increase in new customer activity during Q3 also: July saw 3,147 new plans agreed, followed by 3,228 in August and 3,976 in September.

£963m of property wealth was unlocked in total during Q3 2020 by new or returning customers, up by 38% from Q2, but down 3% from Q3 2019. In addition, this activity would have been influenced by an extended pipeline and delayed cases from earlier in 2020.

David Burrowes, Chairman of the Equity Release Council, comments:

“Despite the uncertain climate, the market has adjusted well to the challenges of operating safely in a pandemic. Desktop property valuations have been used selectively, solicitors have taken extra steps to maintain consumer protections when advising remotely, and product pricing has remained competitive.”

During uncertain times, people are investigating how they are going to keep up their standard of living, pay for potential increases in care costs and plan ahead. Recent research found that 48 per cent of women and 41% of men are concerned about exhausting their retirement savings too soon.

Why equity release?

Your home could hold the key to improving your quality of life or breaking down financial barriers facing you or your family members. Equity release could help if you are looking to increase your available funds for a dream holiday, home improvements or to help a family member with their school or university fees.
If finances are tighter, it could be the ideal solution to help you with your regular monthly or quarterly bills.

Equity release plans are regulated by the Financial Conduct Authority (FCA) and offer a safe way to unlock some of the tax-free funds that may be tied up in your property.

Henry Knight Managing Director of Springtide Capital commented:

“Equity release is becoming a popular option for those looking to release money from their property whilst continuing to live in it. 2020 has been an unprecedented year in many aspects. People are investigating the many alternative options for unlocking the capital in their homes and the increase in equity release activity in Q3 is no surprise. As always, regulated financial advice will help individuals make an informed choice.”

With so many features available within equity release schemes, speak to one of our advisers today to discover if it is the right option for you.

Sources:

https://www.equityreleasecouncil.com/news/q3-2020-market-statistics/

https://www.equityreleasecouncil.com/what-is-equity-release/

Half of women approaching retirement are worried about running out of money in later life – Equity Release Council

Financial Conduct Authority | FCA

Housing Market News

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December 2020 is set to be the busiest month in the housing market in over a decade according to Zoopla. They report that house price inflation is expected to reach 4% by the end of the year but expect house price growth to slow to 1% in 2021.

Regionally, the South East saw the greatest rise in completions in 2020, up 7% year-on-year.

Zoopla suggests that of the new sales agreed in January, just half are likely to beat the SDLT deadline of the 31st March 2021, based on evidence from the previous year.

HOUSE PRICES:

Nationwide figures show that annual house price growth reached a 5 year high in October 2020:

  • Annual house price growth rises to 5.8% in October, this is the highest rate since January 2015
  • Prices up 0.8% month-on-month, after taking account of seasonal factors
  • Average Price (not seasonally adjusted) £227,826

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:

“The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy. Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward”

THE ECONOMY

  • The Office of National Statistics The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 0.9% in October 2020, up from 0.7% in September 2020.
  • The Consumer Prices Index (CPI) 12-month rate was 0.7% in October 2020, up from 0.5% in September. 

GOVERNMENT:

As part of a £20bn overall government investment in long-term housing strategies, Chancellor Rishi Sunak revealed on the 25th November in his spending review speech, that the government is launching a £7.1bn Home Building Fund. The government initiative is intended to support the building of new homes, where they are most needed.

The Chancellor has also confirmed a £12bn investment for the Affordable Homes Programme.

Help to Buy: Equity Loan Scheme announced:

The Government is replacing the existing Help to Buy Equity Loan scheme with a new scheme that is restricted to first-time buyers only and introduces regional price limits.

The current scheme allows both first-time buyers and homeowners to use the Government-backed Help to Buy Equity Loan to buy a new-build home. The launch of the new scheme will result in only first-time buyers being able to apply for the loan, which must be used towards buying a new-build property.

In the new scheme, first-time buyers will still be able to borrow up to 20% (40% in London) of the cost of a newly built home. The buyer must pay a minimum of 5% deposit for the home and then need a help to buy mortgage to fund the remaining cost of the property. The loan is interest-free for the first five years and then interest fees start at 1.75% and rise each year in April by the Consumer Prices Index plus 2%. Borrowers are charged a monthly management fee of £1 for the term of the loan. The new Help to Buy Equity Loan (2021-2023) is due to replace the existing scheme on 1 April 2021.

Regional price caps have also been newly introduced, meaning homes eligible for the loan must be below the set maximum price. First-time buyers wanting to use the Help to Buy: Equity Loan (2021-2023) can reserve their new home using the scheme from 16 December 2020.

Henry Knight, Managing Director of Springtide Capital commented:

“The news of the new scheme is a positive one. It will help to support first time buyers enabling them to get onto the property ladder, especially first time buyers with smaller deposits who may face a much more limited choice of high loan-to-value mortgages.”

Sources:

House price growth close to three-year high – Zoopla

October 2020 House Price Release | Nationwide

Consumer price inflation, UK – Office for National Statistics

https://www.mortgageintroducer.com/govt-launch-1-7bn-home-building-fund/

https://www.helptobuy.gov.uk/equity-loan/help-to-buy-equity-loan-2021-2023/