The Equity Release Council’s (ERC) quarterly market report shows that new customer numbers rose by 12% in Q2, compared with Q1, while total lending rose 15% to £578m.
A double-digit rise in the number of customers taking out new products made Q2 2024 the busiest quarter for almost a year for the equity release market in terms of total customers served and total lending activity.
In addition, existing drawdown customers, who are allocated a cash reserve when they first take equity release, continued to make use of this facility.
A 3% increase to 8,051 returning drawdown customers during Q2 made this the most resilient part of the market when comparing activity year-on-year.
Increases in average loan sizes on both a quarterly and annual basis offered another sign of returning customer confidence.
New drawdown customers were making larger initial withdrawals and reducing the amount held in reserve.
David Burrowes, chair of the Equity Release Council, said: “Following a period of economic uncertainty, we are starting to see consumer confidence gradually return to the market with increasing numbers of new customers choosing to use their housing equity to support their needs in later life.
“The pick-up in activity between the first and second quarters is a welcome reversal of the downward trend seen one year ago.
“There is a long way to go to unlock the market’s full potential, but there are reassuring signs in these figures that we are turning the corner and acclimatising to this unfamiliar interest-rate environment after years of rock-bottom rates.
“Almost 20 years on from their introduction, it’s notable that drawdown products are becoming the majority preference once again.
“Some of the new flexibilities embedded into the modern market such as fixed early repayment charges are equally designed for the long-term and set up so that customers can benefit from years to come.”
He added: “Adviser feedback suggests customers are continuing to find a variety of uses for their property wealth, with gifting and funding home improvements both key motives behind activity in Q2 along with boosting everyday income and closing pension shortfalls.
“However, refinancing an existing mortgage, including interest-only loans, continues to rank as the biggest driver of current market activity.
“The innovative design of modern lifetime mortgages means anyone taking this route will have lots of ways to smooth the transition, not least the freedom to make repayments when they can afford to without the risk of repossession looming over them.”
Reaction:
Lorna Shah, managing director, Legal & General Retail Retirement:
“Today’s figures, on both the number of new customers and existing drawdown customers, show the equity release market’s resilience, and the success of continued product innovation.
“As one of the first lenders to introduce drawdowns across our range, it is great to see customers making use of the extra flexibility to release their equity in stages to support a variety of needs.
“Our own data from the first half of this year showed an increase in new customers using equity release to repay existing mortgages and we expect options like lifetime mortgages to move more into the mainstream as advisers support homeowners to take a more holistic approach towards their later life finances.”
Richard Pike, chief sales and marketing officer at Phoebus:
“2024 is undoubtedly another tough year for the equity release sector. However, the increase in lending of some 15% in Q2 compared to Q1 shows that the market is holding its own and hopefully showing further signs of recovery.
“Market feedback indicates that borrowers are taking more drawdown products rather than a lump sum option.
“This in itself could be seen as borrowers still being slightly risk adverse, even while this is a really viable product area that supports funding requirements for people over the age of 55.
“As a whole, advisers are doing a really good job and working in a very reputable manner. This is reflected in the fact that out of 82 complaints to the Financial Ombudsman in Q1, none on the face of it were about mis-selling.
“Assuming the new UK Government doesn’t de-rail the economic progress made so far this year, interest rates should move down in the second half of the year, making products more attractive to borrowers.
“On this basis, the market should achieve further steady growth in 2024, and 2025 could be a really positive and pivotal year for later life lending.”
