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Equity Release Schemes - UK - May 2016

“The growth of the equity release market is almost guaranteed by a number of strong market drivers, such as population growth, house price rises and changes in retirement preparation. However, consumers remain suspicious of the industry and there is work to be done to ensure that those who need help with retirement financing understand the market and how it can help them.”
– Deborah Osguthorpe, Head of UK Financial Services Research

This report discusses the following key topics:

  • Image and reputation continues to affect the equity release industry
  • Debt levels amongst over-45s are expected to rise
  • Referrals are becoming key to the sales process

This Report considers the factors and trends that are helping to drive demand for equity release. The Report draws on industry research to evaluate recent sales performance, as well as the results of an independently commissioned consumer survey. Mintel’s survey examines the consideration of equity release products among the retired population, as well as those approaching retirement. It also looks at attitudes towards the product, expected financial positions in retirement, as well as the growing issue of debt in retirement.

For the purposes of this Report, Mintel has used the following definitions:

Equity release is a way of accessing the wealth tied up in a property without the need to move. With equity release, homeowners can either borrow against the value of their home (a lifetime mortgage) or sell all or part of it (using a home reversion plan) in return for a regular monthly income, a lump sum, or the facility to get at equity as and when they like (drawdown) or a combination of these options.

To be eligible for equity release, homeowners must meet the following criteria:

  • Be aged 55 or over (or 60+ for home reversion plans); for joint plans the youngest borrower must be at least 55
  • Own their property outright, or in some instances, have a very small outstanding mortgage
  • The property must be in England, Scotland or Wales

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Table of contents

  1. Overview

    • What you need to know
      • Definitions and Report scope
        • Equity Release Council
        • Executive Summary

            • The market
              • Equity release sales have grown by more than 40% since 2011
                • Figure 1: Sales of equity release products, by volume, 2009-15
              • The value of new sales is expected to rise by £1.2 billion to 2020
                • Figure 2: Forecast value of new equity release scheme sales, 2010-20
              • Home improvements are the main reason behind equity release
                • Figure 3: Reason for choosing equity release, 2014-15
              • Companies and brands
                • Top four providers account for nearly 80% of sales
                  • Figure 4: Equity release market share by value of new sales, 2015
                • Above-the-line advertising spend declines as digital tools become key
                  • Figure 5: Above-the-line, online display and direct mail advertising expenditure on equity release, 2011-15
                • The consumer
                  • Using equity in the home is a small share of retirement income
                    • Figure 6: Expected/actual income sources for retirement, March 2016
                  • 4 out of 10 over-45s have outstanding debts
                    • Figure 7: Current outstanding debts, March 2016
                  • Only 14% of over-45s would consider equity release
                    • Figure 8: Consideration of equity release schemes, March 2016
                  • The reputation of the equity release industry remains an issue
                    • Figure 9: Attitudes towards equity release, March 2016
                  • What it means
                  • Issues and Insights

                    • Image and reputation continues to affect the equity release industry
                      • The facts
                        • The implications
                          • Debt levels amongst over-45s are expected to rise
                            • The facts
                              • The implications
                                • Referrals are becoming key to the sales process
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • The equity release market is forecast to grow by 39% by 2020
                                        • More flexible products are leading the market
                                          • Over-55s will grow to a population of 21 million adults by 2020
                                          • Market Size and Forecast

                                            • Equity release sales have grown by more than 40% since 2011
                                              • Figure 10: Sales of equity release products, by volume, 2009-15
                                            • The value of new plans grown at a rapid pace over the last four years
                                              • Figure 11: Sales of equity release products, by volume and value, 2009-15
                                            • Market forecast
                                              • The value of new sales is expected to rise by £1.2 billion to 2020
                                                • Figure 12: Forecast value of new equity release scheme sales, 2010-20
                                                • Figure 13: Forecast volume of new equity release schemes sold, 2010-20
                                                • Figure 14: Forecast value and volume of new equity release scheme sales, 2010-20
                                              • Forecast methodology
                                              • Market Segmentation

                                                • Drawdown plans maintain the largest share of the market
                                                  • Figure 15: Proportional distribution of new equity release sales, by product type, 2011-15
                                                • Older consumers are more likely to use drawdown
                                                  • The value of equity release plans is increasing
                                                    • Figure 16: Average amount released by product type, 2014-15
                                                • Market Drivers

                                                  • The Baby Boomer approach to retirement provides a market opportunity
                                                    • Figure 17: UK population by age group, 2014-34 (2014-based projections)
                                                  • 600,000 interest-only mortgage will mature before 2020
                                                    • Figure 18: Housing tenure by age of household reference person, England data 2014/15
                                                  • A positive outlook for the housing market will increase equity release values
                                                    • Figure 19: Mix adjusted house prices, 2000-15
                                                  • Retirement age changes are likely to increase equity release product innovation
                                                    • Figure 20: Employment status, by gender and age, November 2015
                                                  • Home improvement is the main reason behind equity release
                                                    • Figure 21: Reason for choosing equity release, 2014-15
                                                • Key Players – What You Need to Know

                                                  • Smaller providers increased their market share during 2015
                                                    • Conduct rules are minimising product innovation
                                                      • Digital channels are becoming increasingly important for marketing
                                                      • Market Share

                                                        • Market share for larger providers has declined in 2015
                                                          • Figure 22: Equity release market share by value of new sales, 2015
                                                        • Aviva maintains the value of sales but loses market share
                                                          • Figure 23: Top four equity release providers by value of new sales, 2012-15
                                                      • Competitive Strategies

                                                        • Product introduction focus on flexibility in payments
                                                          • New providers are joining the market
                                                            • More detailed assessments of customer risk are in the pipeline
                                                              • Figure 24: Equity release market sales through Key Retirement, by product type, 2015
                                                            • Platforms are being introduced to support the relationships with advisors
                                                            • Advertising and Marketing Activity

                                                              • Above-the-line advertising spend declines as providers diversify marketing tactics
                                                                • Figure 25: Above-the-line, online display and direct mail advertising expenditure on equity release, 2011-15
                                                              • Brokers dominate above-the-line advertising for equity release
                                                                • Figure 26: Above-the-line, online display and direct mail advertising expenditure on equity release, by advertiser, 2011-15
                                                              • Television adverts are being used to increase awareness
                                                                • Figure 27: Percentage above-the-line, online display and direct mail advertising expenditure on equity release, by media type, 2011-15
                                                              • Nielsen coverage
                                                              • The Consumer – What You Need to Know

                                                                • 1 in 5 over-45s have only one source of retirement income
                                                                  • Only 14% of over-45s would consider equity release as an option
                                                                    • 17% agree that it makes sense to use home equity to fund retirement
                                                                    • Sources of Retirement Income

                                                                      • Using equity in the home is a small part of retirement income
                                                                        • Figure 28: Expected/actual income sources for retirement, March 2016
                                                                      • 1 in 5 over-45s have only one source of retirement income
                                                                        • Figure 29: Expected/actual income sources for retirement, repertoire, March 2016
                                                                      • 24% of home buyers aged 45+ expect to downsize to gain income
                                                                        • Figure 30: Expected/actual income sources for retirement, by housing tenure, March 2016
                                                                      • Those aged 45-64 plan to use a broad range of retirement options
                                                                        • Figure 31: Expected/actual income sources for retirement, by age group, March 2016
                                                                    • Debt Levels at Retirement

                                                                      • 4 out of 10 over-45s have outstanding debts
                                                                        • Figure 32: Current outstanding debts, March 2016
                                                                      • Less than 20% of those who own their own home have outstanding debts
                                                                        • Figure 33: Current outstanding debts, by housing tenure, March 2016
                                                                        • Figure 34: Current outstanding debts, by age group, March 2016
                                                                      • Only 3% of over-45s expect to have significant debts at retirement
                                                                        • Figure 35: Expectations of debt at retirement, March 2016
                                                                    • Financial Health at Retirement

                                                                      • Nearly 9 out of 10 over-45s expect to have good finances at retirement
                                                                        • Figure 36: Financial situation at retirement, March 2016
                                                                      • Women are more likely to have tight finances at retirement
                                                                        • Figure 37: Financial situation at retirement, by gender, March 2016
                                                                    • Consideration of Equity Release

                                                                      • Only 14% of over-45s would consider equity release
                                                                        • Figure 38: Consideration of equity release schemes, March 2016
                                                                      • 1 in 5 over-45s still buying their home would consider equity release
                                                                        • Figure 39: Consideration of equity release schemes, by housing tenure, March 2016
                                                                      • Those approaching retirement are more likely to consider equity release
                                                                        • Figure 40: Consideration of equity release schemes, by age group, March 2016
                                                                    • Attitudes towards Equity Release

                                                                      • The reputation of the equity release industry remains an issue
                                                                        • Figure 41: Attitudes towards equity release, March 2016
                                                                      • Near-retirees worry less about inheritance than previous generations
                                                                        • Figure 42: Attitudes towards equity release, by age group, March 2016
                                                                      • Those holding long-term credit are more likely to see equity release as a last option
                                                                        • Figure 43: Attitudes towards equity release, by type of debt held, March 2016
                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                      • Abbreviations
                                                                        • Repertoire analysis
                                                                        • Appendix – Market Size and Forecast

                                                                            • Figure 44: Best and worst case forecast value of equity release scheme sales, 2010-20
                                                                            • Figure 45: Best and worst case forecast volume of equity release scheme sales, 2010-20
                                                                          • Forecast methodology

                                                                          Companies Covered

                                                                          To learn more about the companies covered in this report please contact us.

                                                                          Equity Release Schemes - UK - May 2016

                                                                          £1,995.00 (Excl.Tax)