Equity release lending continues to rise this year amid inflationary pressures

Consumers borrowed approximately £700 million more in the year’s second quarter when compared to the year’s first three months.

Consumers borrowed £1.6 billion through equity release between April and June this year, according to the latest figures from the Equity Release Council (ERC). This equates to £700 million more than what was borrowed in the first three months of the year.

“The current cost of living pressure is driving many people to take stock of where their wealth lies and for many people their property is a largely untapped resource,” said Alice Watson, Head of Marketing, Insurance at Canada Life.

Much of this rise in borrowing has been driven by new customers in the market, with the number of new plans in this year’s second quarter increasing by 26% when compared to the “subdued” market of last year’s same period, according to the ERC’s research.

As well as more customers, the equity release market has seen a growing number of products and rates on offer. Compared to 2019, there are over three times as many equity release products on the market.

In addition, in July this year Moneyfacts research found equity release rates at a six year high.

New customers preferred lump sum lifetime mortgages over drawdown lifetime mortgages, a trend which has not been identified for the past 13 years.

This could be a result of consumers’ desire to gift money to younger family members in order to fight the cost of living crisis, according to David Burrowes, Chair of the ERC.

Watson, however, also noted that the reversal of this trend could be attributed to consumers looking to repay their mortgage at a time of maturity.

On 28 March this year, the ERC announced the launch of the fifth product standard, the effect of which can be seen in these latest statistics following its first full quarter.

The fifth product standard is a product feature which enables borrowers to make a penalty-free partial loan repayment, mitigating the effects of compound interest, and cut the cost of borrowing.  

“Our new product standard [ensures] people have the freedom to reduce their borrowing if circumstances change,” said Jim Boyd, CEO of the Equity Release Council, in a press release in March.

While this product feature is welcome in the market there are still factors to consider, according to Stuart Wilson, CEO of equity release company Air.

“With property wealth making up a significant proportion of many older people’s assets, we need to consider how we ensure that when they plan their later life finances, they consider all their funding options carefully,” he explained.

If you are considering equity release as a form of funding, speaking to our equity release partner Mortgage Advice Bureau Later Life to discuss your options.