The UK equity release market has reported growth for the first time in 12 months. Quarterly data reveals a 10% increase in new customers and an 8% rise in total lending, accumulating to £716m. This amount was loaned to 7,379 new customers and an additional 8,466 returning for drawdowns.
Average amounts for initial drawdowns and lump sums were reported at £63,238 and £94,806 respectively. These figures, however, mark a decline of around one-third from the previous year. The current market seems to resemble the levels from 2017, with a 45% drop in new customers and a 58% decrease in total lending compared to annual data.
David Burrowes, chair of the Equity Release Council, said: “These figures suggest the process of building back is slowly underway in the equity release market, after a period where higher interest rates have prompted consumers and industry to reach for the ‘reset’ button.
“With customers starting to venture back, the market is at the start of a gradual but fragile road to recovery, with pent-up demand likely to emerge in future years as the interest rate cycle begins to turn again.
“While the clock has been wound back on lending activity and loan sizes, product innovation has increased the flexibility of lifetime mortgages. New customers of plans that meet our high consumer standards can use voluntary repayments to keep their costs in check while existing customers are free to take extra instalments of money as they need it, safe in the knowledge their previous borrowing is fully insulated from rate rises.
“Looking ahead, we must be wholly committed as an industry to putting equity release in its proper context as one of a range of later life lending options and putting property wealth in its proper context at the heart of every retirement planning conversation.”
During Q3 2023, 17,078 customers, both new and returning, opted for equity release products, mainly lifetime mortgages, to tap into their home’s value. This quarter’s active customer numbers saw a minor increase from Q2, but they are down by 33% year-on-year.
The third quarter recorded 7,379 new plans, signifying a small uptick in consumer confidence. However, this is still 45% lower than the previous year. Market conditions are also affected by interest rates, with data indicating a drop from 7.52% in July to 6.63% in September. The shift in product choice was evident, with 53% choosing drawdown lifetime mortgages and 47% opting for a single lump sum.
Both new and returning customers have been cautious, borrowing lesser amounts compared to last year. New customers’ average drawdown was £63,238, and the lump sum was £94,806. Returning customers borrowed an average of £11,863, down 9% from the previous year.
Reaction
Stephen Lowe, group communications director at retirement specialist Just Group:
“Overall business levels are still sharply down on a year ago but there are optimistic signs that a floor has been reached on which to build.
“Both new customer numbers and total lending in Q3 were the highest we’ve seen in 2023 and we would expect further improvement going forward. After the shock caused by the rapid rise in interest rates over the last two years, it is positive to see the Council highlight a recent reduction in the average lifetime mortgage interest rates.
“An ageing population means an increasing number of homeowners are heading into retirement each year. The over-65s are estimated to have £2.6 trillion of net housing wealth*. That offers a lot of firepower to those seeking ways to supplement their income, improve their living standards, pay off more expensive debt, or to generate lump sums for themselves or loved ones.
“Higher interest rates are naturally making people cautious, but the fundamental drivers of growth remain as strong as ever. The range of options available makes it a difficult market for people to navigate alone. We urge people to seek out high-quality professional advice to ensure they consider all the alternatives available to them and choose the best solution to their individual needs.”
