As we enter 2023 in the midst of a recession and a cost of living crisis, it is vital to explore your options of securing your financial future and increasing your cash flow. Equity release could be an option if you are planning on retiring in 2023. If you are indeed interested in using some cash from your property, we will give you a short overview of the equity release market and what 2023 holds for it.
Recently the Equity Release Council published its Q2 2022 equity release statistics and there are some interesting insights. According to the data, between April and June, 2022, 12 845 new equity release plans were taken out by homeowners over the age of 55 in the UK which equates to 205 new plans per working day. According to experts, these numbers show a clear trend of equity release becoming a mainstream option for those homeowners who are approaching retirement or are already in retirement. This trend is expected to continue in 2023, as more attractive product features are released. It is expected that by the end of 2022, the number of new and returning equity release customers will surpass 100,000! Furthermore, the new equity plans agreed in Q2 increased by an impressive 26% compared to the same quarter in 2021.
However, the equity release sector is not immune from the turbulent economic outlook. According to a report by the Equity Release Council, the market has begun to feel the effects of the cost of living crisis. The Council highlighted that the average rates increased from 4,10% in January to 5,74% in August of last year. Historically two factors have encouraged customers to release equity: low interest rates and product flexibility.
There are some more doom predictions about the overall market in 2023. UK Finance says that overall mortgage lending will drop by 15% in 2023 and 2024 in its forecasts. This translates into a fall of mortgage lending from £322B to £275B in 2023 and to £253B in 2024. On the other hand, the trade association says that residential remortgages are going to increase from £82B to £89B in 2023 but dropping back to £81B.
If you are intending to release equity from your home in 2023, there are a few tips to consider. As the Bank of England is currently increasing interest rates to fight the rampant inflation in the British economy, the fixed-rate interest products might be the better option. However, there are risks as well. A long recession and an interest rate increase might also lead to a drop in property prices which can also affect the amount of equity you can release from your property. A longer than expected recession could also potentially lead to a larger drop in the house prices and then some borrowers might even find themselves in negative equity.
