The unexpected challenges of 2020 have affected every possible part of our lives, and the equity release market has been no exception.

Anyone who is considering releasing equity from their home will be interested to know how the market has changed in response to the global pandemic. In this article, we’ll give you an overview of what has happened within the sector this year, and what it could mean for anyone making important decisions about their financial future.

Figures from the first half of 2020 show market changes

The Equity Release Council (ERC) have published their Autumn report, showing the latest figures and trends from the industry. It shows that the sector has continued to evolve and change in response to the challenges of 2020.

Average interest rates on equity release plans have reached a historic low. In July 2020, average rates for equity release products reached record lows of 4.11%. Over half of products offer a rate of 4% or lower, with a fifth offering rates below 3%.

This means that equity release rates have now fallen more than any other personal borrowing products over the last two years. The report shows that equity release rates have improved by higher margins than mortgages, personal loans, credit cards and overdrafts over a one- and two-year period from July 2018.

Alongside this, there are now more options for customers to choose from. The range of product choices available to homeowners increased by:

  • 29% from July 2019, and by
  • 88% from the start of 2019.

This is despite a 5% reduction in product numbers between January and July 2020, falling from 401 to 379. This increase in product options has been driven by competition and innovation within the sector. The market has also seen new features added to plans, offering additional flexibility and options to suit customers individual circumstances.

The impact of Covid-19

There was understandably a reduction in people taking out equity release plans in the first half of 2020, particularly after lockdown measures were implemented. The figures show that there was:

  • A 14% drop in customer activity in the first half of 2020, compared to the same period last year. This includes existing customers taking drawdowns from their plans.
  • 15% fewer sales of equity release products during this period.

This drop in people releasing equity from their home is not surprising and reflects the general insecurity and anxiety that people have been experiencing.

Speaking of the unprecedented uncertainty felt in the first six months of 2020, David Burrowes, Chairman of the Equity Release Council said:

“…the market has shown resilience and consumers considering equity release continue to find a wide range of product options on the market, while the average rate has fallen considerably over the last eighteen months.

As the UK’s ageing population seeks to fund increasingly longer retirements, property wealth can play a fundamental role for many people, both now and in the future, as part of a more joined-up approach to planning for retirement. The challenges that lie ahead show no signs of easing, so it is important that people are aware of all the options available to them to help fund later life.”

Looking to the future

While the reduction in interest rates may make equity release seem like an appealing option, it’s hard to predict what will happen in the future. The effects of Covid-19 have drastically changed people’s lives and their finances.

A recent study by the Office for National Statistics (ONS) shows that more than one in three (37%) of people aged over 65 are worried that they won’t be able to maintain their living standards in retirement. ONS data also shows that more than one third (39%) of the baby boomer generation believe that property would make the most of their money in retirement.

Despite uncertainty in global markets, the benefits of equity release mean it will remain the best option for some customers, giving them the financial freedom to live a better lifestyle in retirement or offer support to younger family members.

As we face tougher economic times, financial planning is more important than ever. It’s vital that customers receive unbiased, professional advice from someone who can talk them through all the options available. Equity release is not the right option for everyone.

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If you’d like to discuss equity release with one of our advisors then get in touch for a free, no-obligation chat. We will give you honest, impartial advice.

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Our honest and dedicated advisors want to help you to fully understand how equity release works. Please read the below, and contact us to find out more.
Equity release may involve a Home Reversion plan or a Lifetime Mortgage which is secured against your property. Equity Release requires paying off any existing mortgage or secured loan. Any money released, plus any accrued interest is repayable upon death, or moving into long-term care. Please be aware that equity release will affect the inheritance you leave and may have an impact on your entitlement to means-tested benefits both now and in the future. To understand the features and risks ask for a personalised illustration. Only if you choose to proceed and our case completes would a typical fee of 1.5% of the initial amount released be payable.
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