In what marks the 25th anniversary of the first industry standards being developed for equity release, a total of £393.9m was lent over the first three months of the year.
Over the course of the first quarter, 5,175 new equity release plans were taken out - an increase of 6% from 4,880 in Q1 2015. This was also the first time the number of new plans topped the 5,000 mark in a Q1 since 2009.
The market share of drawdown lifetime mortgages products has increased slightly year-on-year and it remains the most popular product. The value of drawdown products accounted for 60% of all loans, while the volume of loans was 67%, up 1% and 2% respectively from Q1 2015. There were 3,450 drawdown loans agreed in Q1 2016, up 9% on the same period in 2015. Their value was £234.5m, up by more than a fifth (22%) in the same period.
The value of lump sum mortgages accounted for 40% of total lending in the first quarter and a third (33%) of the total volume of loans. The value of lump sum mortgages was £158.8m, up 19% from Q1 2015.
The value of home reversion plans sold remains less than 1% of the market.
Nigel Waterson, Chairman of the Equity Release Council, said:
“These latest figures represent a strong start to the year for the equity release market, and place housing wealth centre stage in financial planning for later-life. In a year that marks the milestone of 25 years of safe equity release, the market is continuing to build on the momentum of recent years.
“The recent decision from the FCA to reduce affordability assessments for Lifetime Mortgages is a positive development that will help more people benefit from all that equity release has to offer. For a generation that are often asset rich – cash poor, their home is likely to be their greatest asset and should form part of everyone’s planning for retirement.
“As we look forward to the next 25 years, it is important now to maintain expert adviser support for customers as the sector grows, as well as continuing to innovate to satisfy customer demand, all the while preserving standards and consumer protections."
Simon Chalk, equity release expert at Age Partnership, commented:
“Record-breaking equity release lending levels were reached at the start of 2016, continuing the growing trend of using housing wealth to fund later-life. This was driven by an increase in drawdown lifetime mortgages which allow homeowners to extract a cash sum from their existing property and continue to dip into this wealth as and when necessary.
“Recent breakthroughs in the market, such as the FCA’s latest announcement to waive affordability assessments on some plans, will help the equity release market to grow further. These moments are also pivotal in helping over-55s to access their existing wealth as they provide advisers with greater trust to look at innovative ways of exploring options for each individual.”
Alice Watson, Product and Communications Manager at Retirement Advantage Equity Release, added:
“The latest lending figures from the ERC highlight more clearly than ever how equity release is now an integral part of financial planning for retirees across the UK. The sector is maturing apace, spurred by new entrants to the market and product innovations which are great news for equity release customers. People are now taking a holistic approach to their assets in retirement, often looking to their properties first as a source of income for their later years.
“However, we still have plenty of work to do to ensure that people approaching retirement are aware of all the options available to them. Our latest research shows that, despite lending hitting record highs, the UK equity release market has expanded to less than one percent of its potential size. Over the coming years, we expect to see this potential rapidly fulfilled. The FCA’s recent amendments to equity release affordability assessments is a welcome step in this regard, helping to ensure that providers can meet growing customer demand for their products.”
