Industry figures from the Equity Release Council released today show that equity release lending to UK homeowners over the age of 55 totalled £384.3m in the second quarter of 2015, the largest amount for any quarter since records began – surpassing the previous high of £375.4m reached in the third quarter of 2014.
The value of housing wealth released in Q2 2015 was up 18% both on the previous quarter and last year’s Q2 total of £325.6m. Homeowners aged 55+ effectively withdrew £4.2m of housing wealth every day from April to June.
The Council said this uplift comes despite savers gaining greater access to their pension pots under the freedoms launched on 6th April.
Record lending in Q2 meant the total value of equity released in the first six months of 2015 reached £710 million, the largest sum on record for the first half of the year and an 11% increase on H1 2014.
There were 5,414 new equity release customers in Q2 2015, an 11% increase on the last quarter: pushing the total number of new customers past 10,000 for the first six months of 2015.
The value of lending, via lump sum lifetime mortgages, increased by 10% year-on-year in H1 2015 to reach £285.3m. This is the highest total for lump sum activity in the first half of any year since H1 2007 when the value hit £355.9m.
However, the value of lending via drawdown lifetime mortgages surpassed this rate of growth, rising 12% year-on-year from £379.2m (H1 2014) to £423.5m (H1 2015). It also rose faster from Q1 to Q2 (21% vs. 14% for lump sum products) as customers sought to withdraw their housing wealth in regular instalments rather than as a one-off amount.
Home reversion plans account for less than 1% of the overall equity release market, yet these too saw an increase of 18% in lending from £534,765 in Q1 2015 to £632,647 in Q2 2015.
Nigel Waterson, chairman of the Equity Release Council, said: “The last three months have been a landmark period for UK retirees and those approaching retirement, and equity release activity continues to grow amid a sea of change. There is no doubt the pension freedoms have created more options for people to consider, but the appeal of tapping into housing wealth is on the rise as older consumers seek to make use of all the assets at their disposal.
“Doom and gloom often surrounds discussions on retirement income, but while contributions to pension pots remain low, an entire generation of homeowners have been paying into property their whole lives: making it an asset that can transform their financial options beyond the age of 55. Anyone seeking advice on how to plan their retirement should consider their property as a valuable source of wealth.
“With the mainstream mortgage market grappling with issues of so-called age discrimination in the wake of the Mortgage Market Review (MMR), it is time to build bridges and encourage more focus on equity release as a source of finance in retirement. New providers promise to bring more innovation to the equity release arena this year and will help to satisfy the rising demand.”
Alex Edmans, head of retirement at Saga, added: “The Mortgage Market Review has stopped many older people from accessing a traditional mortgage, this and the fact that many people are now coming to the end of their interest only mortgage term without a full repayment plan, has meant that more are turning to equity release as a viable solution to borrowing in retirement. Indeed Saga has seen an increase in the use of equity release to clear a mortgage.
“Now is a good time to consider equity release, as interest rates are at their lowest ever levels, property prices are increasing and loan to values have recently increased, meaning people are able to access more of the wealth tied up in their property.”
