Equity release borrowing falls

2nd February 2024

Latest figures from the Equity Release Council has indicated that lending has decreased.

The figures show that total annual lending in 2023 was £2.6 billion following a record-breaking £6.2 billion in 2022, returning the market to the level of activity last seen between 2016 to 2017 (£2.1 billion to £3.1 billion).

New and returning equity release customers in Q4 totalled 13,651, down from 17,078 in Q3 2023 and 20,597 in Q4 2022.

Throughout 2023, 26,119 customers took out new equity release plans, with drawdown plans restored as the majority preference – attracting 53% of customers last year and 55% in Q4.

The average amount borrowed by new customers in Q4 2023 was £79,484, compared to £106,917 a year prior. Last year, 26,119 customers took out new equity release plans, with drawdown plans restored as the majority preference.

Across 2023, there was total lending of £2.6bn, returning the market to the level of activity last seen between 2016 to 2017 (£2.1bn to £3.1bn). This is according to  newly-published full year market statistics from the Equity Release Council (ERC).

New and returning equity release customers in Q4 totalled 13,651, down from 17,078 in Q3 2023 and 20,597 in Q4 2022. The average amount borrowed by new customers in Q4 2023 was £79,484, compared to £106,917 a year prior.

David Burrowes, Chair of the Equity Release Council, said “Every corner of the mortgage market saw rising interest rates put the brakes on activity in 2023, and equity release was no exception with customers and their advisers taking a cautious approach. This resulted in loan sizes shrinking and fewer people borrowing for more aspirational reasons.

“While we’ve grown accustomed to stronger demand in recent years, we shouldn’t lose sight of how far the market has matured since activity was last at these levels. New product features and customer protections mean we are well positioned to serve the inevitable demand that will come as confidence returns. Council standards represent the pinnacle of protection for older consumers, which makes it crucial for them to seek out a member firm when exploring their options.

“It’s clear some people are holding out for future rate cuts, but with no timeline as to when this may happen or how sustained this will be, older homeowners will need to continue to consider what is right for their individual circumstances. Many people are relying on their property wealth to retire in comfort, and we are focused on ensuring they can access it confidently and securely.

“Whether the customer wishes to top up their pension, support their family or manage their borrowing in retirement, today’s products offer more flexible options to help manage costs, with voluntary repayments baked into every new plan. Ultimately it is about choice and it is vital that people plan carefully for the future and only commit to long-term products after careful consideration, expert advice and consulting with loved ones.”

Legal & General Home Finance Chief Executive Craig Brown said “Last year was challenging for homeowners for many reasons, resulting in a significant downturn in the equity release market, but I’m proud the later-life lending industry has shown resilience and pushed forward with innovation. As we look ahead, we anticipate 2024 will bring a renewed interest in lifetime mortgages and see more customers reconsider using property wealth for their financial needs.

“Customers have been cautious, but there are signs that the market is stabilising. House prices are still significantly higher than pre-pandemic figures (18% up from the end of 2019), so property still represents an important asset for homeowners to consider as part of their long term financial planning.”