Figures from the Equity Release Council for the period January to March 2015 show the largest first quarter lending total ever.
Total lending through equity release in the first quarter of 2015 was £325.7m, an increase of 3% year–on-year from Q1 2014. There were almost 5,000 new customers in Q1 2015, a 2% increase from Q1 2014.
The average value of equity release lending per customer was £66,747 in Q1 2015. This is 4% higher than Q4 2014 and 1% higher than Q1 2014. It is the highest value recorded for the first quarter of the year, despite low inflation and an ease in the cost of living. The Council believes this is a sign that households are still struggling with their finances – as evidenced by recent Equity Release Council research.
Drawdown continued to be the most popular product and the market share increased slightly year on year – the value of drawdown products was 59% of lending in the quarter and the volume was 65%, both up 1% from Q1 2014. The value of drawdown products was £192m, up 5% from Q1 2014. The volume was 3,176, up 4% from Q1 2014.
The value of lump sum mortgages accounted for 41% of the total lending in the quarter and the volume 35%. The value of lump sum mortgages was £133.2m, up 1% from Q1 2014 and the volume was 1,700.
The value of home reversion plans sold remains less than 1% of the market.
Nigel Waterson, chairman of the Equity Release Council, said: “These figures show that the appetite for equity release continues to grow despite the potential uncertainty to peoples’ financial planning decisions caused by the recent pension access reforms. These have brought the topic of financial planning for retirement firmly to the fore and we hope this encourages people to seek financial advice to discuss the many options available to them, of which equity release is one.
“Despite sitting on large sums of property wealth, many are still struggling to make ends meet and are even suffering from sleepless nights or skipping meals as a result. Equity release offers vital financial support for later life and allows retirees to dramatically improve their standard of living, with people accessing just a small portion of their total housing wealth in most cases. We believe that understanding of equity release has improved significantly over the last year and that equity release is now firmly established as a mainstream form of borrowing. This is especially true as older borrowers are increasingly turned away by normal mortgage lenders. I predict increased consumer demand and product innovation from providers over the coming year.”
Chris Prior, manager, sales and distribution at Bridgewater Equity Release, said: “These latest quarterly lending figures show the ongoing strength of the equity release market and, given the upsurge in activity last year, also go a long way to proving the demand drivers for these products are not going away. Record-breaking quarters are not often posted in the first three months of the year, given that January and February in particular tend to be slower months, however this is another sign that there is a better understanding of equity release and the solution it can provide to many consumers with different needs and circumstances.
“Much has been made about the potential impact of the pension freedoms on equity release take-up and, even though these figures are pre-pension changes, we still believe the products are likely to grow in popularity throughout 2015 and beyond. Issues such as the ‘interest-only time bomb’, the pull-back on lending into retirement, the need for retirees to fund a growing number of financial responsibilities in retirement such as the provision of care, and consumers’ interest in supplementing their income levels, are ongoing. Therefore, our anticipation is that 2015 will move forward as it has begun which means continued increases in both equity release interest and activity.”