The total of £514.4m of housing wealth unlocked during Q2 2016 was up 34% annually from £384.3m in Q2 2015, and 58% higher than two years ago when £325.6m was released in Q2 2014. Total lending for Q2 2016 surpassed the previous quarterly record of £452.6m in Q3 2015 by 14% (£61.7m).
It means that the three busiest quarters for equity release lending have all come within the last 12 months, as over-55s look in growing numbers to the wealth built up in their homes for a range of later life financial planning purposes.
Over-55s increased appetite to use housing wealthy has been supported by market developments which include new providers and increasing choice of products and features emerging. In addition, the market received support from the regulator in April when they amended the legislation to allow optional interest repayments to be exempt from mortgage affordability rules².
Nigel Waterson, Chairman of the Equity Release Council commented:
“These figures are the latest sign that UK homeowners increasingly see housing wealth as a fundamental part of their retirement funding plans. The long term rise of house prices has allowed many older homeowners to build up considerable reserves of housing equity, which have the potential to solve many of the financial challenges facing the UK’s ageing population.
“Growing demand from consumers since the recession has been met by a concerted effort from the sector to grow the range of available products and the reach of specialist advice. Looking ahead, this work will continue with an increasing focus on building relationships within the sector and with related markets such as residential mortgages and later life planning, so consumers can be referred for advice on equity release when it can help their circumstances.
“There is also an important role for government and regulators when it comes to financial education. As well as helping savers to understand the choices offered by the ‘pension freedoms’, it is just as important to help homeowners understand the options they have to put themselves on a stronger financial footing in later life.”
Alice Watson, Product and Communications Manager at Retirement Advantage Equity Release, commented:
“Equity release is now firmly establishing itself in the retirement finance mainstream. Over the past three months we’ve seen new entrants to the market, fresh partnerships and a welcome change to the FCA’s affordability assessments. These developments have contributed to equity release’s already surging popularity.
“This huge increase in lending has come despite unprecedented political and economic uncertainty ahead of the EU referendum. That speaks volumes about the resilience of the sector. It’s too early to tell what impact the Brexit vote will have on equity release but, if mortgage borrowing conditions tighten as the result of a post-referendum economic slowdown, it’s appeal could increase even further.
“Accompanying this uplift in lending is increasing diversification of the where and why of equity release. More and more of our customers are releasing wealth from property to make home improvements, gift to family members and pay for holidays.
“While the unprecedented growth highlighted by today’s ERC figures is promising, we’re still seeing less than 1% of the market’s potential fulfilled. With retirees now taking a holistic approach to financial planning, and property values outside of London rapidly catching-up with the capital, this potential will be increasingly realised over the coming years.”
