The second half of 2015 saw a 26% rise in the value of lending compared with the first half, from £710m in H1 to £898m in H2. This is the biggest half-year growth rate of the post-2008 era, beating a previous high of 24% between H1 and H2 2013.
The trend was mirrored in the volume of new plans, rising 21% between H1 and H2 2015, also more than any other year post-2008. Annual lending reached a new high of £1.61bn in 2015. Of the £17bn of housing wealth unlocked via Council members by over-55 homeowners since 1991, over a third has been accessed in the last five years as the market evolves and consumer demand grows.
While 65-74 remains the most common age for taking out an equity release plan (54.4%), H2 2015 was the second successive year to see a rise in the percentage of new plans agreed by customers aged 55-64 when compared to H1: up from 17.5% to 21.2% in this period.
H2 2015 was also notable for the rise in plans taken out by older customers. Those aged 85+ accounted for 5.9% of plans agreed, almost twice the 3.0% share a year earlier.
Customers aged 55-64 buck the overall trend with the majority (54.5%) choosing lump sum products. In contrast, from age 75 onwards four out of five opt for drawdown plans, taking an initial sum in later life while preserving an additional sum to withdraw as the need arises.
Nigel Waterson, Chairman of the Equity Release Council, commented:
“Greater choice from new and existing providers is driving the appeal of equity release, with product features emerging that allow more freedom to make capital repayments and pay interest on some loans. We expect this trend to continue, and the challenge for industry and regulators is to ensure product innovation is combined with consumer protection and long-term sustainability.
“Building closer relationships with the mortgage and later life markets is also crucial so that, where appropriate, more consumers can access specialist financial and legal advice to make an informed choice about equity release."
Alice Watson, Product and Communications Manager at Retirement Advantage Equity Release, said:
“The fact that people approaching retirement and those further into retirement are turning to equity release illustrates the continuing maturity of the market. The needs of people aged 55 and 85 will be completely different, so a one-size-fits all approach simply won’t work. We’re working closely with advisers to help them introduce the concept of equity release as part of a broader, holistic view of retirement finances."
Simon Chalk, equity release expert at Age Partnership, commented:
“As the repercussions of the Mortgage Market Review’s tougher lending criteria continue to stack against older borrowers, more customers in the 55-64 age bracket are opting for equity release as an alternative to more traditional routes. This is especially the case among those who took out interest-only mortgages and are looking for an alternative method of repayment. In 2015, we saw a rise of 68% in interest-only borrowers turning to equity release as a solution for their debt from the previous year. But for those simply looking to supplement their income, pay for care, or perhaps need a one-off sum, equity release could offer an alternative way to capitalise on housing wealth without the need to downsize.
“Flexible drawdown plans mortgages, in particular, are becoming an increasingly popular type of Lifetime Mortgage as they allow borrowers to dip into their housing wealth as and when needed, while leaving the remaining amount intact. This provides an attractive option for those who need some extra cash or for those who simply want to release some more cash to enjoy in retirement."
