Equity release has been enjoying a surge of popularity in the last few years, with older homeowners realising that they can take advantage of the equity tied up in their home without needing to downsize. The rise of house prices has no doubt helped by giving people more equity to access, and as a result, this form of lending has gone from strength to strength – and hit record levels during the first three months of the year.
The figures, from the Equity Release Council, show that the value of equity release lending totalled £393.9m in the first quarter of 2016, an increase of 21% year-on-year and the highest Q1 lending figure ever recorded. Furthermore, a total of 5,175 new equity release plans were taken out during the three-month period, an increase of 6% from Q1 2015 (when 4,880 were taken out), and the first time the number of new plans has surpassed the 5,000 mark in a first quarter since 2009.
This highlights the strength of the industry at the moment, and how much homeowners are valuing the chance to release some of the cash from their properties. The figures also revealed clear consumer preference in terms of how they access that cash, with drawdown plans – whereby homeowners can access smaller sums of money when they need, rather than taking a significant lump sum in one go – being by far the most popular option.
In fact, a total of 3,450 drawdown plans were agreed during the first three months of the year – up 9% on the same period a year ago – representing 67% of all lifetime mortgages taken out. Those plans were valued at £234.5m, an increase of 22% year-on-year. The value of lump sum mortgages, meanwhile, totalled £158.8m during the three months (up 19%), with the number of these loans accounting for 33% of the market. Home reversion plans, the final type of equity release plan, remain the least popular, with the value of these sales remaining less than 1% of the market.
"These figures represent a strong start to the year for the equity release market and place housing wealth centre stage in financial planning for later life," said Council chairman Nigel Waterson. "The market is continuing to build on the momentum of recent years, [and] the recent decision from the FCA to reduce affordability assessments for lifetime mortgages is a positive development that will help more people benefit from all that equity release has to offer.
"For a generation that is often asset rich but cash poor, their home is likely to be their greatest asset and should form part of everyone's planning for retirement."
Now could be a great time to get in on the action and consider equity release – consult our no-obligation planning service to find out more and see if it could be an option for you.
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