Equity release lending hits record high in Q4

Rozi Jones
25th January 2016
Nigel Waterson Equity Release Council

Retirees unlocked a record amount of housing wealth via drawdown lifetime mortgages in Q4 2015, pushing annual equity release lending to a new high of £1.61bn, according to year-end results from the Equity Release Council.

Lending via drawdown products totalled £271m between October and December 2015, the largest quarterly total since this type of lifetime mortgage first emerged in 2004. Seven in ten (70%) new plans agreed in Q4 2015 were drawdown, up from 63% in Q3 2015, as more customers opted to withdraw their housing wealth in stages to boost their retirement income as and when they need it.

Drawdown lending for the whole of 2015 was also the highest on record at £961m. It pushed total equity release lending activity by members of The Council¹ to an unprecedented £1.61bn: up 16% from £1.38bn in 2014. Last year saw more than 22,500 new plans agreed for the first time since 2008.  

The market’s second half performance was even stronger, with total lending of £898m in H2 2015 up 21% from the previous half-year record of £741m in H2 2014. Both drawdown and lump sum products saw H2 lending grow 21% year-on-year, with drawdown passing £500m (£538m) for the first time in any half-year period. The value of home reversion plans – £4.5m – was the most in any half-year period for four years.

At 22%, the year-on-year lending growth rate in Q4 2015 was the largest of any quarter last year, despite a slight dip in quarterly lending from £453m in Q3 to £445m.

Since falling to a post-recession low of £789m in 2011, annual equity release lending has more than doubled in the last four years and now exceeds its pre-recession peak (£1.21bn in 2007) by 33%. Over the whole of 2015, drawdown lifetime mortgages accounted for two in three (66%) new plans agreed, while lump sum lifetime mortgages made up 34% and home reversions below 1%.

Since publishing a set of policy recommendations for Government in October 2015, The Council has made further recommendations to the Treasury and the FCA to help develop the market and meet growing consumer demand for using housing wealth in retirement planning.

Nigel Waterson, Chairman of the Equity Release Council, commented:

“These year-end figures are the latest sign of growing reliance on housing wealth as a key pillar of later-life financial planning. The rising popularity of drawdown has been one of the success stories of the last decade, and product features have since appeared allowing customers to protect a percentage of their equity as an inheritance, make part-repayments of capital or make interest repayments on their loan.

“Looking ahead, the challenge is to continue developing products which meet consumer needs while ensuring that innovation is combined with protection and long-term sustainability. The work led by The Council and its members to uphold standards for equity release products and advice has been fundamental to creating a safe market for consumers, and we will continue these efforts to meet growing customer demand alongside regulators and the Government. The Council enters its 25th year with huge confidence in the future of equity release.

“Housing wealth is often people’s greatest asset and it makes sense for equity release to be on every homeowner’s checklist to consider as part of their retirement and estate planning. At the same time, it is not suitable for every circumstance, which is why professional financial advice and independent legal advice are essential so that customers understand how the products work, and what they can offer. Supporting advisers as the market grows will be a top priority in the year ahead.”

Alex Edmans, Head of Retirement at Saga, added:

“The increase in people using drawdown lifetime mortgages is really positive. People seem to be growing more confident in this sector as they recognise that they can use the money tied up in their home to help them financially plan for later life.
“These latest figures suggest that people like being able to unlock cash from their home as and when they need it. This can be a smart move financially as people only have to pay interest on the funds they release, but they know that they can unlock more cash at a later date if they need to.
“However, equity release is not right for everyone. We always recommend getting thorough advice before taking out a plan, as well as speaking to family and friends so they know what you are thinking of doing.”

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