The equity release market has recorded its busiest quarter in almost a decade, as increasing numbers of retirees choose to tap into the wealth tied up in their homes.
According to the latest data from the Equity Release Council, total equity release lending reached £325.6 million in the second quarter of 2014, a 32% year-on-year rise and the largest quarterly amount since Q4 2004.
The data also revealed there were 5,275 new equity release customers in the quarter, 10% more than in the first three months of the year, taking the total number of customers in 2014 past 10,000.
With house prices on the rise and confidence in equity release as a retirement option also increasing, the average amount released exceeded £61,000 over the quarter, 16% more than in the same period in 2013.
However, with lump sum mortgages accounting for 41% of new equity release sales by value, up from 37% a year earlier, and drawdown plans seeing their share drop to 59%, a subtle shift in the way equity release is being used is also apparent.
As their names suggest, lump sum mortgages involve a lump sum being taken at the outset, while drawdown plans involve the gradual release of funds.
The thinking behind drawdown plans is that funds will only be 'drawn down' as and when they are required, which will limit the build-up of interest compared with a lump sum plan.
Explaining the shift towards lump sum plans, Nigel Waterson, Equity Release Council chairman, said: "It is likely to be a side effect of the number of people with a mortgage still to pay off in later life, or looking to release some of their equity to help their children onto the property ladder.
"Financial planning for retirement is as much in the spotlight as ever and equity release remains a key part of this discussion – especially now that people approaching retirement will have greater autonomy in how they use their pension assets. A holistic approach is called for where equity release forms part of a wider discussion about financial planning for later life, which includes property, pensions, annuities and savings."
Are you looking to unlock a proportion of the value – or equity – you have in your home? Equity Release could be the solution for you
Speak to an adviser directly by simply calling 01737 233462 and quoting MFER04
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