Equity release figures hit record high

Latest quarterly figures from the Equity Release Council have found equity release lending reached a new quarterly high of £1.6 billion in Q2.

The rise is the fourth consecutive quarterly period to close with record lending eith the total amount released in the first six months of 2022 surpassing £3.1 billon, a 36 per cent more than the previous half-year record of £2.3bn in 2021.

Homeowners aged over 55 took out 12,485 new equity release plans between April and June this year, equivalent to 205 new plans being agreed each working day.

The number of new plans agreed in Q2 increased 26% year-on-year when compared with the subdued market of Q2 2021 when pandemic restrictions remained in place but fell short of the peak of 12,891 recorded in Q4 2018.

New and returning customers withdrew £1.6b illionn of property wealth, with new plans sizes largely stable at around £135,000 while returning drawdown customers typically withdrew £13,506 each.

Whilst more new customers opted for lump sum lifetime mortgages over drawdown lifetime mortgages for the first time in 13 years, since Q1 2009, increasing from 45% of new plans in Q2 2021 to 54% now.

David Burrowes, Chair of the Equity Release Council, said “The need to improve older people’s access to housing wealth was widely recognised by industry and policymakers long before the Covid-19 pandemic and current cost-of-living pressures emerged.”

“The fact that hundreds of homeowners are now choosing to release equity each day, based on detailed financial and legal advice, is significant progress from the days when the market was considered an under-developed niche rather than the mainstream option it has become.”

“Raising awareness of how modern equity release products work alongside other financial solutions is essential so people who are asset-rich but cash-poor can benefit from the wealth they have built up over their lifetimes and also support those around them.”

“The recent trend towards lump sum products is likely to be influenced by customers’ continuing desire to gift money to younger family members and share their property wealth across generations, particularly if cost-of-living pressures are starting to bite.”

“By making penalty-free partial loan repayments last year, customers reduced their future interest costs by tens of millions of pounds.

“The flexibility to make voluntary repayments, with no risk of repossession if they can’t afford to, is likely to be important to a growing number of people as they look to balance their books. The reality that interest rates have risen from historic lows will also impact people’s plans and the Council will monitor this closely as the year progresses.

“Today’s product range leaves a number of avenues open for customers to limit their overall borrowing costs². In every instance, expert advice and careful consideration are essential.”

Will Hale, CEO of Key, the UK’s largest Equity Release Advice Firm, said “Today’s figures from the Equity Release Council highlight a market that is stepping up to meet consumer wants and needs as we return to a post-pandemic society. Indeed, over 45,000 new and returning customers chose to use their housing equity to H1 2022 to support families, boost retirement income and repay debt.”

“At a time when the UK is facing a cost of living crisis unlike anything we have seen for many years, the fact that older homeowners can use what is often their most valuable asset to help them manage their finances in later life should be celebrated. The modern later life lending market is well-regulated and progressive offering a wide range of products with flexible features and valuable customer protections.”

“Our own Market Monitor highlighted that in the current rising interest rate environment, 40% of equity release customers used some or all of their funds to repay an outstanding mortgage.”

“With fixed interest rates for life and the ability to make both ad hoc capital as well as interest repayments, a lifetime mortgage can be an excellent option for an older borrower who is either unable to remortgage to a mainstream product or retirement interest-only mortgage due to affordability challenges or is facing a shortfall at the end of their interest-only mortgage term.”

“Looking to the future as the later life lending market grows, we need to continue to put customer needs at the heart of the development of products and advice propositions and consider how we raise awareness of all the options available to an ever-more diverse customer base.”

Dave Harris, CEO of more2life, said “What a difference two years can make! In Q2 2020, The Equity Release Council figures suggested that lending to new and existing customers was nudging £700 million and today, we are pleased to see that it has more than doubled in Q2 2022 to £1.6 billion.”

“While there is no doubt this is driven by increasing numbers of customers who are taking the proactive choice to include their largest single asset in their later life planning, advisers and the wider later life lending community has certainly played a role. Speaking to networks, platforms and IFA firms, there is real interest in the role that property can play in helping people to enjoy a better standard of living in retirement.”

“There is much for the industry still to do and we need to continue to focus on how we can best meet customers needs but the Q2 figures suggest that we are on the right track.”

Alice Watson, Head of Marketing, Insurance at Canada Life said “Today’s analysis from the Equity Release Council paints a clear picture of how equity release is playing a valuable role across a huge swathe of society. The current cost of living pressures is driving many people to take stock of where their wealth lies and for many people their property is a largely untapped resource.”

“It is interesting to see the rising popularity of lump-sum products, leapfrogging drawdown to become the most popular option among new customers. This could be the result of people looking to clear their existing mortgage at a time of maturity, or seeking to support a loved one’s deposit for their first home. All this further highlights the real-world applications of equity release and how property wealth can be used flexibly and effectively.”