Equity release experiences biggest quarterly rise since 2004

Figures released this week from the Equity Release Council show that in Q3 equity release lending rose by 21% over the year, reaching £452.6m, a quarterly rise of £68.3m and the steepest in 11 years.

 The figures, which reveal that total Q3 lending rose 21% year on year, compared with 18% annual growth in Q2 and 3% in Q1, set a new lending record for a second successive quarter. 

The number of new plans taken out in Q3 2015 exceeded 6,000 for the first time since Q4 2008. This represents a 12% increase on Q2 and is equivalent to £5m of housing wealth being accessed by the over 55s every day.

The volume of new plans was up 9% year on year, this being the strongest figure of 2015 to date, compared with 3% annual growth in Q2 and 2% in Q1.

The increasing popularity of equity release, which is being used by homeowners over the age of 55 to support their finances later in life, has resulted in lending for Q1-Q3 2015 already exceeding the 2013 annual total (£1.16bn vs £1.07bn).

These figures are within £220m of the record annual total of 2014 (£1.38bn).

Drawdown lending, via lifetime mortgages, hit £266.8m in Q3, rising 18% year on year from £231.6m, thus reaching an all time high.

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).

Lump sum mortgages are popular with customers who have larger one-off costs to cover, such as clearing an outstanding mortgage or making home improvements.

Lending via home reversions also proved to be very popular and despite accounting for less than 1% of the total market, this type of finance almost tripled from £632,647 in Q2 2015 to £2.37m in Q3 2015.

Nigel Waterson, chairman, Equity Release Council said,

“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.”

Dean Mirfin, technical director at Key Retirement, added:

"With the average amount released from properties so far this year approaching three times the average defined contribution pension pot the need to utilise property wealth and the direct positive impact that it can have on retirement finances cannot be understated."

In September this year the Financial Conduct Authority confirmed plans to conduct a review into the equity release sector including an investigation into whether products were innovative enough.