The number of new and returning equity release customers reached a new quarterly high of 23,395 between January and March this year, according to the latest Equity Release Council data.
A total of 150,653 new and existing customers have been active during the pandemic, starting from Q2 2020, compared with 171,586 in the previous two years.
Annual growth in the number of new plans agreed recovered to 21% in Q1 from – 9% a year earlier.
Meanwhile, total quarterly lending reached £1.53bn between January and March, up from £1.34bn in Q4 2021.
Additionally, the average new loan size grew 6% year-on-year, matching the latest inflation figure and surpassed by the 11% annual UK house price rise which added £27,000 to the average home.
David Burrowes, chair of the Equity Release Council, said: “The popularity of equity release so far this year is the natural result of modern products offering greater flexibility and a property market where growth has far outstripped inflation, alongside an ageing population.
“After two years where customer numbers have been subdued by the pandemic, realising gains from rising house prices can make a major difference to people’s quality of life.
“Not only are more people considering equity release, but they are doing so for many different reasons and helping old and young alike to fund everyday costs and major life events.
“Innovation has made equity release products more adaptable to customers’ changing circumstances. Our standards mean lifetime mortgages remain the most secure type of retirement home finance, with customers protected from interest rate rises, repossession and passing on debt due to negative equity.
“However, it remains vital that decisions are carefully considered through both a long-term and short-term lens, with family input wherever possible and with financial and legal advice in every instance.”
Reaction
Stephen Lowe, group communications director at retirement specialist Just Group:
“Today’s strong Q1 figures show growth resuming in the equity release market in the wake of the pandemic with quarterly customer numbers reaching a record high of more than 23,000 and lending topping £1.5bn for the first time.
“People who put their plans on hold during the lockdowns are coming back into the market. We may also be seeing a response to rising inflation as retirees who are starting to feel the cost of living squeeze turn to other sources of income.
“Certainly, rising house prices and competition between providers in terms of pricing and product features – such as the introduction of medical underwriting across our lifetime mortgage range – are making lifetime mortgages attractive. Confidence is further underpinned by the high levels of consumer protection such as the no-negative equity guarantee, fixed or capped interest rates and the new ERC product standard guaranteeing penalty-free partial repayments.
“This year has got off to a very good start with every sign that lifetime mortgages are fast becoming a cornerstone of retirement planning alongside pensions and other investments. Whether homeowners are seeking lump sums, extra income or are estate-planning, the key message is to seek out high quality advice to ensure the plan fits their unique needs and aspirations.”
Stuart Wilson, CEO at Air Group:
“Strong house price growth and notable product innovation have both accelerated the expansion of the later life lending sector in Q1. We have seen homeowners turning to equity release for various reasons during this period, with some borrowers returning to big-ticket spending, while others have used the funds to secure a better standard of living in retirement.
“Until inflation starts to ease, we anticipate that we will see the number of borrowers using later life lending to reduce the pressure on everyday expenditure continue to build. Our market is growing rapidly, as shown by quarterly lending figures reaching £1.53bn, and the onus is on advisers to guide borrowers towards the best solution for their financial needs amongst the increasing number of options. Advisers are the beating heart of our market and will be crucial to securing the wellbeing of borrowers in what is likely to be a penny-pinching year.”
Simon Gray, managing director at equity release advisory firm HUB Financial Solutions:
“This is the first quarter of data that shows the market fully back in its stride following the disruption of the pandemic. The numbers are not just up sharply on last year but represent the resumption of longer-term market growth compared to pre-pandemic business levels too.
“In March we saw the introduction of the ERC’s new product standard allowing penalty-free partial repayments which is another attractive feature that is becoming the norm and showcasing how equity release solutions are continuing to evolve and improve to better meet consumer needs.
“Increasing sophistication and competition underlines the importance of well trained, knowledgeable advisers who take time to fully understand the borrowers’ requirements and tailor suitable solutions to meet their unique requirements, as needed. Lifetime mortgages are, by definition, long-term commitments and it is important to make the best choices possible at the outset rather than expecting a better deal to come along later.
“In an environment where the economic situation remains uncertain advisers can show the value of their profession to a range of customers whether their goal is bolstering their income, estate planning, providing cash lump sums, or paying for care.”
Stuart Wilson, corporate marketing director at more2life:
“As today’s record figures show, the year has started with a bang for the equity release market. More than 12,000 new plans were agreed in Q1 which is a 20% increase on the same period last year, and the number of existing customers returning to withdraw from agreed reserves rose nearly 70% year-on year, approaching 2019 levels.
“With drawdown products currently making up almost three quarters of the plans sold annually, it is good to see these flexibilities in action and shows a robust path forward for the sector. This success is testament to the collaboration and hard work of lenders, advisers, trade bodies and third-party specialists in the lifetime mortgage market.
“Looking to Q2, it’s likely that with inflationary pressures adding to existing demographic drivers, more over-55s will seek to augment their income and support loved ones by tapping into their equity while house prices remain high. This makes it even more vital for equity release lenders to work closely with advisers – and vice versa – so the later life finance market can build off its current momentum to meet the rising demand and continue to provide the best possible support for over-55s exploring their financial options.”
Kay Westgarth, head of sales at Standard Life Home Finance:
“The more than 12,000 new equity release plans taken out between January and March this year contributed to £1.53bn worth of lending in Q1 2022, up 14% from the final quarter of last year. This level of growth echoes the increasing demand we are seeing for equity release products as a greater number of over-55s recognise the benefits of later life lending as a way to boost their retirement income.
“Whether over-55s are keen to increase their income to meet the current inflationary challenges, manage modest retirement savings or help family members, it is vital that they carefully consider all their options – including housing equity.
“By working together with advisers, the industry can not only continue to grow the market further, but make sure that those in need of extra income in retirement are aware of the financial options available to them.”
Will Hale, CEO at Key Later Life Finance:
“Today’s figures from the Equity Release Council (ERC) reporting £1.53 billion of lending in Q1 not only highlight a record quarter for the industry but also demonstrate the growing significance of the sector for the UK economy and for household finances. Whether money released has been used to boost spending power, manage debt or support family, it has made a real difference to many people which underlines the true strength of the vibrant later life lending market.
“Product flexibility is vital to the sector’s continued development, and it is worth noting that customers saved almost £100m in future interest costs in 2021 by making penalty-free partial repayments. With the introduction of this flexibility as the fifth ERC standard, customers now have more choice than ever before to find a product which fits with their changing circumstances through later life.
“Property wealth is firmly established as an integral part of retirement planning and will remain important not least because of the cost-of-living pressures which are affecting household bills for all sections of society with inflation at a 30-year high. Advisers have a major role to play in supporting customers and their families in navigating the growing financial pressures.”
