The average amount borrowed by new equity release customers in Q4 2023 was £79,484, compared to a more substantial figure £106,917 a year prior, new data from the Equity Release Council has revealed.
As part of its Q4 and 2023 market statistics, the council found that new and returning equity release customers in Q4 totalled 13,651, down from 17,078 in Q3 2023 and 20,597 in Q4 2022.
Throughout 2023, 26,119 customers took out new equity release plans, with drawdown plans restored as the majority preference – attracting 53% of customers last year and 55% in Q4.
In addition, 2023 saw 64,448 active customers taking out new plans, making use of drawdown reserves or agreeing extensions to existing plans, down 31% year-on-year.
The year also recorded a total of £2.6bn in annual lending, a modest figure when compared to the record-breaking £6.2bn in 2022.
David Burrowes, chair of the Equity Release Council, said: “Every corner of the mortgage market saw rising interest rates put the brakes on activity in 2023, and equity release was no exception with customers and their advisers taking a cautious approach.
“This resulted in loan sizes shrinking and fewer people borrowing for more aspirational reasons.
“While we’ve grown accustomed to stronger demand in recent years, we shouldn’t lose sight of how far the market has matured since activity was last at these levels.
“New product features and customer protections mean we are well positioned to serve the inevitable demand that will come as confidence returns. Council standards represent the pinnacle of protection for older consumers, which makes it crucial for them to seek out a member firm when exploring their options.”
He continued: “It’s clear some people are holding out for future rate cuts, but with no timeline as to when this may happen or how sustained this will be, older homeowners will need to continue to consider what is right for their individual circumstances.
“Many people are relying on their property wealth to retire in comfort, and we are focused on ensuring they can access it confidently and securely.
“Whether the customer wishes to top up their pension, support their family or manage their borrowing in retirement, today’s products offer more flexible options to help manage costs, with voluntary repayments baked into every new plan.
“Ultimately it is about choice and it is vital that people plan carefully for the future and only commit to long-term products after careful consideration, expert advice and consulting with loved ones.”
Reaction:
Mark Gregory, founder and CEO of Equity Release Group:
“Last year presentedmarket conditions resulting in an incredibly difficult year and one of the most challenging we’ve probably experienced within the industry so far, with the market down over 50% in total lending.
“Notwithstanding this, there is now vested interest within the market following the rise of a broader set of products and increase in RIO/TIO lending, which brings about higher case values.
“Plus, with recent innovations in hybrid, diverse and more favourable products, we expect this to also raise the level ofoverall borrowing across the later life lending industry.
“Furthermore, the 15-year gilt index has been slowly coming down from the highs of 2023, which has enabled lenders to reduce their rates.
“Coupled with the fact that property values have held their own against expectation, we have now seen lenders begin to increase their loan-to-values (LTVs).
“Hence, we are seeing the green shoots of recovery, with Advisers feeling a renewed sense of confidence following consumer’s appetite for greater lifestyle purchases, as opposed to just debt consolidation mortgage repayments.
“Heading into the midst of Q1, opportunities continue to arise this year, particularly for advice firms looking to enhance their systems and generate greater efficiencies for their business in line with Consumer Duty.
“The work we have put in to our technology and systems throughout 2023, has enabled us to head into 2024 favourably, as we continue to drive forward. We have experienced an uplift in enquiries and applications this month in comparison to January 2023, with applications up 41% and average loan size up 80%.
“This is reflective of our whole of market advice approach with more RIO and TIO enquiries, plus the rise in Lifetime Mortgage LTVs and the demand for greater flexibility in retirement.
“Whilst the next few months are still going to be tough and present challenges for the industry, we’re heading in the right direction to get back on track.”
Craig Brown, CEO at Legal & General Home Finance:
“Last year was challenging for homeowners for many reasons, resulting in a significant downturn in the equity release market, but I’m proud the later-life lending industry has shown resilience and pushed forward with innovation.
“As we look ahead, we anticipate 2024 will bring a renewed interest in lifetime mortgages and see more customers reconsider using property wealth for their financial needs.
“Customers have been cautious, but there are signs that the market is stabilising.
“House prices are still significantly higher than pre-pandemic figures (18% up from the end of 2019), so property still represents an important asset for homeowners to consider as part of their long term financial planning.
“As a lender, we will continue to work with advisers and listen to their feedback to ensure we carry on delivering innovative solutions to give customers as many options as possible when considering their later life lending needs.”
