Q1 equity release lending hits record high

The equity release sector has had a record breaking start to the year with Q1 figures from the Equity Release Council showing the largest first quarter lending total ever.

Related topics:  Retirement
Rozi Jones
24th April 2015
pension nest egg annuity retirement old people

Total lending through equity release in the first quarter of 2015 was £325.7m: an increase of 3% year–on-year from Q1 2014, despite the potential uncertainty created by the new pension freedoms coming into effect this month.

There were almost 5,000 new customers in Q1 2015, a 2% increase from Q1 2014.

The average value of equity release lending per customer was £66,747 in Q1 2015. This is 4% higher than Q4 2014 and 1% higher than Q1 2014. It is the highest value recorded for the first quarter of the year, despite low inflation and an ease in the cost of living. The Council believes this is a sign that households are still struggling with their finances.

Drawdown continued to be the most popular product and the market share increased slightly year on year – the value of drawdown products was 59% of lending in the quarter and the volume was 65%, both up 1% from Q1 2014.

The value of drawdown products was £192m, up 5% from Q1 2014. The volume was 3,176, up 4% from Q1 2014.

The value of lump sum mortgages accounted for 41% of the total lending in the quarter and the volume 35%. The value of lump sum mortgages was £133.2m, up 1% from Q1 2014 and the volume was 1,700.

The value of home reversion plans sold remains less than 1% of the market.

Nigel Waterson, Chairman of the Equity Release Council commented:

“These figures show that the appetite for equity release continues to grow despite the potential uncertainty to peoples’ financial planning decisions caused by the recent pension access reforms. These have brought the topic of financial planning for retirement firmly to the fore and we hope this encourages people to seek financial advice to discuss the many options available to them, of which equity release is one.

“Despite sitting on large sums of property wealth, many are still struggling to make ends meet and are even suffering from sleepless nights or skipping meals as a result. Equity release offers vital financial support for later life and allows retirees to dramatically improve their standard of living, with people accessing just a small portion of their total housing wealth in most cases. We believe that understanding of equity release has improved significantly over the last year and that equity release is now firmly established as a mainstream form of borrowing. This is especially true as older borrowers are increasingly turned away by normal mortgage lenders. I predict increased consumer demand and product innovation from providers over the coming year.”

Helen Davies, Head of Implementation at Partnership, said:

“Although, the figures for Q1 2015 were 13% down on those recorded in Q4 2014 – falling from £365.7 million to £325.7 million – this is an annual trend caused by the impact of the festive season rather than any cause for concern. Indeed, if you compare Q1 2015 (£325.7 million) to Q1 2014 (£315.5 million), you will see that the market has grown 3.23% year on year which is clear evidence of a vibrant active market.

“With the advent of Pension Freedoms an increasing number of people are being encouraged to take a more holistic view of their pension finances, something that can only be good news for the equity release industry.   We look forward to watching the market develop and grow over the coming years.”

Chris Prior, Manager, Sales & Distribution at Bridgewater Equity Release, added:

“These latest quarterly lending figures show the ongoing strength of the equity release market and, given the upsurge in activity last year, also go a long way to proving the demand drivers  for these products are not going away. Record-breaking quarters are not often posted in the first three months of the year, given that January and February in particular tend to be slower months, however this is another sign that there is a better understanding of equity release and the solution it can provide to many consumers with different needs and circumstances.

“Much has been made about the potential impact of the pension freedoms on equity release take-up and, even though these figures are pre-pension changes, we still believe the products are likely to grow in popularity throughout 2015 and beyond. Issues such as the ‘interest-only time bomb’, the pull-back on lending into retirement, the need for retirees to fund a growing number of financial responsibilities in retirement such as the provision of care, and consumers’ interest in supplementing their income levels, are ongoing. Therefore, our anticipation is that 2015 will move forward as it has begun which means continued increases in both equity release interest and activity.”

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.