"Product innovation has played a huge role in the growing appeal of equity release to a range of customers, including the growing number of homeowners with interest-only mortgages due for repayment."
It leaves total annual lending for 2016 on course to break through the £2bn mark for the first time, having reached £1.48bn in the first nine months of the year.
From July to September 2016, 7,414 new equity release plans were taken out: an increase of 11% from the previous quarter and up 23% year-on-year. This is also the first time the number of new plans exceeded 7,000 since Q4 2008.
Lump sum lifetime mortgages proved popular in Q3, with market share increasing from 33% of new plans in Q2 to 37%. The 2,773 new plans agreed was an increase of 26% from Q2 to the highest number since Q4 2008.
The total value of lump sum lending rose by more than a quarter (26%) between Q2 and Q3 2016 from £208.8m to £264.1m. This was up by 44% year-on-year and the largest amount for more than a decade.
Overall, drawdown lifetime mortgages accounted for 62% of new plans in Q3 - the smallest market share since Q4 2010. However, drawdown plans remain the most popular category, with home reversions continuing to represent a small (>1%) part of the market.
The 4,632 new drawdown plans taken out in Q3 2016 was the highest number seen since this type of product appeared on the market. This is also an increase of 4% from the previous quarter and 21% year on year.
Nigel Waterson, Chairman of the Equity Release Council, commented: “Coming 25 years after the first industry Standards were introduced for equity release, these record lending figures further highlight the appeal of using housing wealth as part of the solution to funding later life.
“Product innovation has played a huge role in the growing appeal of equity release to a range of customers, including the growing number of homeowners with interest-only mortgages due for repayment. The range of features available now give people the option to choose inheritance protection, downsizing protection, monthly interest repayments or voluntary capital repayments when they opt for a lifetime mortgage. At the same time, customers automatically receive three layers of protection encompassing regulated financial advice, clear product standards and independent face-to-face legal guidance.
“Increased competition and new entrants to the market have helped to lower the costs of equity release dramatically in recent years, making it even more attractive to customers. Indeed, average equity release interest rates fell further than any other category of mortgage product during the first half of 2016 with independent research showing customers have never been better served in terms of products and rates. Looking ahead, The Council will continue to work with regulators, government and industry to promote the sector and its role in supporting an ageing population.”
Andrea Rozario, Chief Corporate Officer at Bower Retirement, said: “The 10-year high in lump sum lending underlines a shift in the market towards more retirement lending with customers increasingly using their property wealth to help out family and to fund major purchases rather than simply to boost retirement income.
“Customers are seeing the benefits of record lows in average rates of around 5.6% and increased competition means equity release is on course to break the £2 billion-a-year mark for the first time which will in turn help attract more lenders to the sector.
“The opportunities for advisers to build a rewarding career in equity release are clear as customers need expert independent advice if they are to continue to benefit from the increased choice available.”
Simon Chalk, equity release expert at Age Partnership, added: “Housing wealth continues to play a crucial role in retirement planning with trillions tied up in over-55s’ properties. This is set to carry on in an upwards trajectory in the coming years, even if house price growth is at a modest rate whilst Britain redefines its relationship with Europe.
“With the Government’s increased focus on our ageing population and their future, it has allowed the equity release market and wider retirement industry to be more inventive in finding suitable solutions for individuals in shaping their finances for the future. The latest lending figures from the Equity Release Council show how popular equity release is, with the numbers at record highs in recent months. As life expectancy keeps increasing, more people will use equity release to unleash the value locked up in their home to enjoy their retirement years.”
