The latest quarterly lending figures from the Equity Release Council have revealed that homeowners aged 55 and over are releasing the equivalent of £11m every day from their homes.
The industry data reveals that third quarter lending activity saw over £1bn of property wealth unlocked for the first time in any quarterly period. The total was up £195m (24%) since Q3 2017, from £824m as the market and product range continue to grow to satisfy wider consumer demand.
This milestone comes just weeks after the Government backed a recommendation by the Housing, Communities and Local Government Select Committee. It recommended that equity release should feature among the home finance options that will be signposted to older people by the new Single Financial Guidance Body, to help support a more rounded approach to later life financial planning.
An unprecedented 12,016 new equity release plans were agreed from July to September 2018, equating to 6% more new customers than in Q2 2018. This is nearly double the amount seen in the same period three years ago (6,049 in Q3 2015).
The average amount of property wealth unlocked by new customers has remained broadly consistent, showing people are withdrawing equity in modest amounts. The average new lump sum lifetime mortgage plan was 5% lower than in Q2 2018, decreasing from £95,991 to £91,398, while the average first instalment from a drawdown plan saw a marginal quarterly increase of 3% from £63,584 to £65,343.
Drawdown products remain the most common choice among new customers, with three in five (63% or 7,547) choosing this type of plan over lump sum products, which were chosen by 37% (4,466). Home reversion plans make up less than 1% of the overall market for new plans agreed.
Total lending of £99m to returning drawdown customers in Q3 2018 was the largest quarterly amount on record – a result of the growing number of customers with these products. However, the average drawdown taken per customer was marginally lower than the previous quarter, for the second quarter in a row, decreasing from £11,543 to £11,443.
Further advances (extensions to existing plans) were agreed by 902 customers this quarter, virtually unchanged from Q2 2018 and a more modest number than a year earlier. The average further advance amount agreed across both drawdown and lump sum mortgages also deceased compared with previous quarters.
David Burrowes, chairman of the Equity Release Council, said: “The equity release market is making an increasingly important contribution to the later life landscape on an individual, social and economic level. Older homeowners are discovering in growing numbers that property wealth can play a key role in funding a myriad of needs, from making home improvements and adaptations to paying for social care and giving financial help to younger family.
“Government, regulators and industry must continue to seek ways to help people take a more rounded approach to later life financial planning. No one solution suits every individual need, and there is no doubt more people can benefit from considering property wealth alongside pensions, savings and other assets when making financial decisions – both for themselves and for those around them.
“As the range of later life products continues to grow, it is vital we encourage customers to consider all available options, and ensure they can access appropriate guidance and specialist advice to weigh up the benefits, costs, flexibilities and protections to best meet their current and future needs.”
Dave Harris, CEO of More 2 Life, added: “With the industry exceeding £1bn for the first time in a single quarter, these figures are the latest sign of a flourishing equity release market and is testament to how far the whole sector has come. It is clear that older homeowners are increasingly turning to equity release to unlock the wealth tied up in their homes to help to boost their finances.
“Whilst funding and innovation will be key in unlocking future growth of the market, the continued success of the equity release market also depends on advisers offering the product as an option to their clients. We must encourage advisers to take the necessary equity release qualifications or at the very least remain informed of the latest industry trends and product innovations in order to include it as part of holistic retirement planning discussions.
“Ignoring the potential benefits of housing wealth or only choosing to consider it through a narrow lens is simply not good enough. The demand for equity release is only going to rise as we couple an ageing population with the need for retirees to fund a long and happy retirement and they need advisers who are able to help them make the right choices.”