Will Brexit Have an Impact on Equity Release Loans?

Brexit has, of course, been everywhere on the public conscience and it is only due to the impact of the COVID-19 pandemic that the conversations around Brexit have subsided.

Whether you’re looking to take out a new equity release loan, or you’re an existing customer looking for reassurance or potentially to even re-negotiate your current loan, we’ve taken a look at how Brexit has impacted the equity release market since the 2016 vote and the likely future implications.

Will Brexit Affect the Equity Release Market?

Brexit has had minimal impact on the equity release market. As a UK-based financial product, it is unlikely that Brexit will prevent equity release schemes from continued growth, barring any catastrophic financial market collapse.

Read on to find out more.

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The Number of People Taking Equity Release Since Brexit

A recurring theme throughout this guide will be the limited impact Brexit has had so far on equity release, but the one key area of change that could be attributed to the Brexit vote is the number of people taking out a plan.

The number of people taking out an equity release plan in the 2 years up to 2019 grew 32% compared to the previous 2 years (source: Equity Release Council Autumn 2019 Market Report)

This is substantial growth, but equity release plans are generally becoming more prominent, and interest rates are at an all-time low. None of these can be directly attributed to Brexit but you could make an argument that the growing customer base could be a result of people looking to borrow more money to see themselves through retirement.

What’s clear is that Brexit isn’t making people uncomfortable about taking out equity release loans, and with financial advisers showing the confidence in recommending them despite the potential fines should the advice be judged to be poor, clearly there is a belief that the market can sustain these schemes and customers can safely borrow against their equity without fear of major issues in future.

The Impact on Interest Rates Since the Brexit Vote

Equity release interest rates have been on a steady decline since the Brexit vote.

Source: Equity Release Council Autumn 2019 Market Report

This is the lowest the interest rate has ever average for equity release schemes, making it a great time for customers to sign up and enjoy the best deal they could get. Many financial advisers believe it would be difficult for the interest rate to get much lower, and so if you’re thinking about it and you’re a qualifying age, now might be the time to consider your application.

If Brexit were to spark more uncertainty as the trade deals are struck and Britain’s financial future becomes clearer, then interest rates could rise to help protect lenders.

However, even with a rise it would unlikely skyrocket and could still remain a viable prospect for many people seeking a cash lump sum to help them with their retirement costs.

Equity Release: The Impact on House Prices Since the Brexit Vote

House prices have a major impact on equity release loans. The higher they rise, the larger the valuation of your home will be, which will result in your equity being worth more when you do take out the loan.

Equally, if house prices were to completely bottom out and drop by 25%, you could be in serious financial trouble if you were an equity release customer as the value of your estate may make it difficult to cover the costs of the amount you owe.

The chances of that happening are extremely low, so you shouldn’t be concerned and if anything you should take heart from the way house prices have changed since the Brexit vote.

Source: The Land Registry Website

Even with all of the uncertainty surrounding Brexit, house prices have continued to rise each year. Admittedly the increase is slowing down, but prices aren’t dropping, and arguably we’re now through the worst of the uncertainty. It may be more reassuring to know that prices are looking to hit around 2.2% increase in July too, so even this dip is recovering.

It’s clear that Brexit hasn’t caused a complete drop-out of the housing market and so equity release schemes are still an attractive option for many. Your equity in your home is only getting more and more valuable, and this can be transformed into a cash lump sum that you could use to help you through retirement, especially if trade deals that result from Brexit make everyday living more expensive due to higher tariffs.

The Future Impact of Brexit on Equity Release for New Customers

With Brexit and the equity release market, it’s very much a case of ‘so far, so good’. The market may have strengthened even further had the Brexit vote gone the other way, but it’s likely that the uncertainty around personal finance, and the strengthening personal assets due to increased house prices, has made it worthwhile for new customers to take out equity release schemes.

That being said, the trade deals that Britain will sign over the coming months and years will continue to have an impact on the financial markets, as will other factors like the ongoing issues with the COVID-19 pandemic. There’s no way of knowing for certain how things will go.

What is clear is that equity release remains, and looks likely to remain, a viable option for anyone in their retirement years who wishes to unlock the value of their assets to either help them with retirement income as belts are tightened, or as a way of adding value to their home through renovations.

If house prices were to suddenly plummet and interest rates skyrocketed due to Brexit’s impact on trade and financial markets then equity release may not be as attractive but so far, these scenarios don’t seem too likely.

The Future Impact of Brexit on Equity Release for Existing Customers

Equally, it’s looking fairly rosy for any existing equity release customers who may be concerned about the impact of Brexit. With interest rates being lower than ever, customers are encouraged to shop around and see if they can transfer their deal onto a better plan with a new provider, while house prices look secure enough that they needn’t trouble anyone concerned about their debt.

If you are an existing customer and you’re thinking about whether you could get a better deal, you should speak to both your lender and an independent financial adviser. Your lender will want to keep you and may be able to negotiate a better package, but your financial adviser is still necessary to make sure your new deal still protects you.

You may have certain clauses or features in your current plan, such as drawdown protection, that may be lost if you were to renegotiate and you need someone experienced and on your side to ensure you don’t actually end up worse off.

In Summary

There have been no major negative impacts on the equity release market due to Brexit and, for the foreseeable, it’s looking unlikely that Brexit will have a future impact although other market factors may do. If you believe that now is the right time to apply for equity release, then first make sure you read our further guides available on our website.

We’ll take you through the advantages and disadvantages of equity release, as well as the eligibility criteria and other key information that it would be good for you to understand.

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.