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Equity release lending growth at 10-year high

Equity release lending growth at 10-year high

Category: Retirement

Updated: 27/09/2016
First Published: 27/09/2016

Following yesterday's news that competition in the equity release market is booming, today brings fresh evidence of the success of that competition, with figures from the Equity Release Council showing that annual growth in equity release lending has hit a 10-year high.

The figures show that equity release lending totalled £908m in the first half of the year, marking an increase of £198m, or 28%, from the £710m lent in the same period of 2015 – the highest annual increase seen in the last decade, and surpassing the most recent high of H1 2014 when annual growth hit £160m.

Not only that, but lending during the second quarter of the year (April-June) exceeded £500m for the first time, setting a new record for the highest quarterly lending total, as more and more people realise the potential benefits of equity release. This is expected to continue, too, with there typically being a rise in lending during the second half of the year; as a result, the Council expects that the annual lending total may even surpass the £2bn milestone by the end of 2016.

Greater choice

This shows how rapidly consumer demand for such products is growing, and happily, our own figures reveal that providers are accommodating by offering more choice and better deals
than ever before. Indeed, the number of equity release products available has risen by 63% in the last year alone while interest rates have fallen, offering plenty of choice for homeowners looking to unlock their housing wealth.

But just what type of plan is proving the most popular? Drawdown lifetime mortgages (which allow customers to withdraw small amounts of equity when they need it) are taking the crown once again, with 67% of all new plans agreed during the first half of 2016 falling into that category. Not only that, but the total number of drawdown plans agreed (7,917) has become the largest number in any first-half period on record – it truly is a record-breaking year for equity release!

Much of this could be driven by rising house prices, with the average value of an equity release customer's home having risen by 8.1% in the last year to £306,854. However, although this means that many will have more equity at their disposal, they're not being frivolous.

Indeed, the average customer continues to draw on a modest percentage of their total equity: the typical first payment from a drawdown plan actually dipped from 15.4% in the first half 2015 to 14.5% this year, with customers instead holding more housing wealth in reserve to draw on at a later date. Many appear to be viewing their housing equity as a potential asset to their retirement income, too, with most customers taking out a new plan between the ages of 65 and 74.

Nigel Waterson, chairman of The Equity Release Council, isn't surprised by the growth of the market, with "savings shortfalls and other financial challenges leav[ing] many over-55s looking for an extra source of income in later life". He added that housing wealth can also offer a vehicle for inheritance planning, with the right plan offering homeowners the chance to boost their retirement income while at the same time leave something for their loved ones.

Is it something you'd want to consider? It's a huge decision but one that could well be beneficial, so contact our no obligation equity release planning service to see if it could be an option.

What next?

Find out more about equity release by reading our guide

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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