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Equity release is becoming increasingly recognised as a way to boost retirement income, with more and more older homeowners taking the plunge and freeing up some of the cash tied up in their home – so much so that lending has hit a record high for yet another quarter.
Figures from the Equity Release Council show that over-55s withdrew £824 million of property wealth from their homes between July and September, all through equity release, marking the first time that lending has surpassed £800 million in a single quarter.
This marks a notable rise from the £701 million lending total recorded between April and June, and is a rise of 44% from the year previously, when lending totalled £572 million. In line with that, the number of equity release customers has also seen a significant jump, with 17,982 recorded between July and September, an increase of 12% from the previous quarter.
Within that, 9,905 were new customers and took out brand new plans (up 17% on a quarterly basis and 34% year-on-year), with an additional 6,849 being returning drawdown customers (who opted to release wealth in instalments) and 1,138 further advance customers (who agreed extensions to existing plans).
Looking on a slightly longer term basis further highlights the growth of the sector, with lending activity having risen by 82% in the past two years and new customer numbers rising by 64% over the same period, as growing numbers of homeowners look to housing wealth as a viable means of financial planning in retirement.
"The sustained growth in housing wealth withdrawals is indicative of a wider shift in the way consumers are approaching their retirement planning, by taking a broader range of financial options into consideration," commented Nigel Waterson, chairman of the Equity Release Council.
"Property is, for many people, their largest asset and has the potential to play an increasingly important role in the future of retirement funding. The combination of rigorous safeguards and flexible products in today's market is one reason why housing wealth is now being used to support a wide range of financial goals. These range from boosting pension income and supporting retirement lifestyles to funding home improvements and adaptations, consolidating debts and providing a living inheritance to younger generations."
A particularly notable finding is the growing popularity of drawdown plans, where customers can release cash from their property in instalments to supplement their retirement incomes, rather than taking out lump sums at the outset.
Indeed, drawdown products now account for over three-quarters (77%) of the entire market, up from 68% the previous quarter and 62% a year ago, while the popularity of lump sum products has fallen accordingly.
Given that drawdown products allow for smaller amounts of equity to be released at the outset – customers unlocked an average of £64,793 over the last three months through drawdown, compared with £100,389 released through lump sum plans – customers can reduce the build-up of interest, as well as unlock further sums when they need.
There's clearly increased appetite among older borrowers to unlock some of the wealth tied up in their homes, and with this sector benefiting from increased innovation and greater safeguards, it could be well worth considering for those who could benefit from a cash injection in retirement.
Of course, it won't be for everyone and there are a lot of aspects to consider before taking out an equity release plan, which is why you need to be certain that you're making the right decision. Find out more by reading our equity release guide, and contact our no obligation advice service to see if it could be for you.
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