Industry figures from the Equity Release Council show rising demand in Q3 as the market registered its fastest annual growth rates of 2015 in terms of lending and the number of plans agreed.
Total Q3 lending rose 21% year-on-year, compared with 18% annual growth in Q2 and 3% in Q1, to reach £452.6m. In doing so, it set a new lending record for a second successive quarter: equivalent to £5m of housing wealth being accessed every day.
There were 6,049 new plans taken out in Q3 2015, representing a 12% increase on Q2 and the first time this measure has exceeded 6,000 since Q4 2008. The volume of new plans in Q3 was up 9% year-on-year: the strongest figure of 2015 to date, compared with 3% annual growth in Q2 and 2% in Q1.
Growing demand for equity release means lending for Q1-Q3 2015 already exceeds the 2013 annual total (£1.16bn vs £1.07bn), and is within £220m of the record annual total of 2014 (£1.38bn).
Lending via drawdown lifetime mortgages reached a new high in Q3, rising 18% year-on-year from £231.6m (Q2 2015) to £266.8m.
The value of lending via lump sum lifetime mortgages also increased by 18% year-on-year in Q3 2015 to reach £183.5m, the largest figure since Q4 2006 (£204.7m).
Despite accounting for less than 1% of the total market, lending via home reversions almost tripled from £632,647 in Q2 2015 to £2.37m in Q3 2015.
Nigel Waterson, Chairman of the Equity Release Council, commented:
“Appetite among over-55 homeowners for tapping into their housing wealth continues to grow. There is increasing awareness that equity release can offer many benefits in later life by providing people with extra income or the means to meet other costs and expenses.
“The months ahead will see important discussions with regulators and government about how to build on this foundation, so that where there is a need, more people can make use of what is often their biggest source of retirement wealth.
“New arrivals in the sector and additions to the product range are helping more people to find options that suit their needs and circumstances. The sector will continue to innovate, as well as maintaining The Council’s standards of financial advice and consumer protections so customers continue to be fully informed and supported in their retirement planning.”
Steve Wilkie, managing director, Responsible Equity Release, said:
"Equity release is providing an option, when there doesn't seem to be any options left, for pensioners who are facing having to sell their homes because they are persona non grata with lenders.
"A steady stream of homeowners in retirement are using equity release to pay off their mortgages, because their lenders are reluctant to remortgage even small debts.
"The cold hard truth is that without the option of equity release, many pensioners face the prospect of having to sell their property to clear their outstanding mortgage balance, even if the debt is only in the tens of thousands of pounds.
"Equity release has matured into a mainstream financial product. Innovation and flexible products has opened up the equity release market to a wider audience, by offering more options to meet specific needs and circumstances."
Alice Watson, Product and Communications Manager at Retirement Advantage Equity Release, added:
“The momentum behind equity release continues to gather rapid pace. These are striking figures which suggest we are witnessing a year where equity release firmly establishes itself in the mainstream retirement lending landscape.
“The national surge in activity over the last quarter was certainly replicated at Retirement Advantage. We’ve seen a big jump in the average loan amount we’re providing, driven largely by the introduction of our Platinum range earlier year which allowed for bigger loan applications.
“The industry is innovating as providers bring exciting new products to market, while customers’ needs evolve as the retirement landscape is reshaped. More and more customers using equity release to fund a home purchase only goes to show how people are feeling better equipped to live the lives they want as they retire.
“Against this backdrop, it’s encouraging to hear the FCA pledging to look at how it can better support the equity release industry as it grows and is used by more and more retirees across the country. Chris Woolard recently said a review is needed to explore what’s needed to ‘foster more of a market’ and we look forward to engaging with them and working together to help this aim become a reality.”
