16% less people have used using equity release for their mortgage repayments in H1 2023 compared to H1 2022, the latest data from Mortgage Advice Bureau Later Life’s Market Monitor Report has revealed.
This is due to lenders restricting loan-to-values (LTVs) to reflect housing market conditions, leaving some customers unable to access the financing they need.
Remortgaging of existing equity release products has also fallen by 5%, dropping from 19% (H1 2022) to 14% in H1 2023.
Once again, the lower LTVs available and higher interest rates may have discouraged some customers from refinancing their existing equity release plans.
The research suggests that the key priorities for equity release customers in H1 2023 lie in supporting their families (20%) and improving their homes to make them more appropriate for older age (45%).
Indeed, the proportion of equity release used for gifting has witnessed a remarkable increase, rising from 12% in H1 2022 to 16%.
This shift indicates an increasing focus on supporting loved ones during challenging times, marking a 4% uptick.
Meanwhile, spending on holidays only accounts for 2% of the total amount of equity released – an unsurprising statistic given the ongoing cost of living crisis and 14 consecutive interest rate increases as of August 2023.
Notably, the proportion of people using equity release to repay unsecured debt has fallen to one in ten. Just 5% of the proceeds are used for this purpose – a 4% drop from the previous year’s 9%.
These more modest figures are likely due to people needing to prioritise other means of spending, with advisers recommending a more cautious approach to borrowing and managing debt.
One noteworthy aspect of equity release usage is its role in financing home improvements.
While 45% of equity release plans are partially or fully used for home improvements, the actual expenditure on such projects accounts for a smaller portion, amounting to 12%, or £131m.
Steve Humphries, proposition director – mortgages at Mortgage Advice Bureau Later Life, said: “Like other segments of the residential property market, the later life lending market faced challenges at the beginning of the year.
“Nevertheless, all signs point to a stronger second half of the year compared to the first.
“As confidence gradually improves and people realise that any potential house price corrections aren’t as severe as initially predicted, customers will begin to reconsider their options for later life lending, and how they choose to use equity release.
“The industry is poised to embrace this shift, and I have confidence that we’ll witness a surge in product innovation.
“This will enable advisers to serve a more diverse range of customers and ensure that the remaining half of 2023 resembles previous years and – most importantly – a return to a healthier market.”
