The Equity Release Council has revealed that homeowners aged 55+ took out 12,485 new equity release plans between April and June this year, equivalent to 205 new plans being agreed each working day.
The launch of the Council’s fifth product standard on 28 March means all new plans in Q2 came with the option for customers to make penalty-free partial repayments when they can afford to – allowing them to reduce their future interest costs with no requirement to make ongoing repayments.
The number of new plans agreed in Q2 increased 26% year-on-year when compared with the subdued market of Q2 2021 when pandemic restrictions remained in place but fell short of the peak of 12,891 recorded in Q4 2018.
New and returning customers withdrew £1.60bn of property wealth, with new plans sizes largely stable at around £135,000 while returning drawdown customers typically withdrew £13,506 each.
More new customers opted for lump sum lifetime mortgages over drawdown lifetime mortgages for the first time in 13 years, since Q1 2009, increasing from 45% of new plans in Q2 2021 to 54% now.
David Burrowes, chair of the Equity Release Council, said: “The need to improve older people’s access to housing wealth was widely recognised by industry and policymakers long before the Covid-19 pandemic and current cost-of-living pressures emerged.
“The fact that hundreds of homeowners are now choosing to release equity each day, based on detailed financial and legal advice, is significant progress from the days when the market was considered an under-developed niche rather than the mainstream option it has become.
“Raising awareness of how modern equity release products work alongside other financial solutions is essential so people who are asset-rich but cash-poor can benefit from the wealth they have built up over their lifetimes and also support those around them. The recent trend towards lump sum products is likely to be influenced by customers’ continuing desire to gift money to younger family members and share their property wealth across generations, particularly if cost-of-living pressures are starting to bite.
“By making penalty-free partial loan repayments last year, customers reduced their future interest costs by tens of millions of pounds. The flexibility to make voluntary repayments, with no risk of repossession if they can’t afford to, is likely to be important to a growing number of people as they look to balance their books. The reality that interest rates have risen from historic lows will also impact people’s plans and the Council will monitor this closely as the year progresses. Today’s product range leaves a number of avenues open for customers to limit their overall borrowing costs. In every instance, expert advice and careful consideration are essential.”
Stephen Lowe, group communications director at retirement specialist Just Group, added: “Demand for equity release has recovered strongly from the pandemic wobbles with the last three quarters each setting new lending records. The total amount released in the first six months of this year is more than £3.1 billion, 36% more than the previous H1 record of £2.3 billion in 2021.
“The number of new customers is also trending higher following the pandemic as we head into the traditionally busier second half of the year. Clearly lifetime mortgages, which now account for virtually the entire equity release market, are becoming a keystone of financial planning for some customers alongside their pensions and other savings.
“The business drivers continue to be very strong. House prices are still rising, providers are competing hard for business with extra features such as interest-servicing and medically underwritten rates. Locking into today’s interest rates – still near historic lows – is appealing. It’s likely some demand is from people who put plans on hold during lockdown, alongside those starting to feel a squeeze from rising household costs.
“Homeowners may be using equity release to generate lump sums, extra income or for estate-planning but the key point for customers is that they seek out high quality advice to ensure the plan fits their unique needs and aspirations.”
