Equity release lending hits new record high in Q3

Hannah Godfrey reports

The equity release sector has seen another record-breaking quarter, according to figures from the Equity Release Council, with total lending in the third quarter of 2017 surpassing £800m for the first time.

Between July and September, over-55s withdrew a total of £824m of property wealth from their homes through equity release plans, surpassing the £701m recorded in the second quarter of this year and making it the highest figure seen in any quarter since the council began tracking quarterly activity in 2002.

The total represents a 44% year-on-year increase on the same period last year when lending stood at £572m, and an 82% increase on the £453m of the third quarter of 2015.

There were 17,982 equity release customers between July and September, up 12% on the second quarter of 2017. Of those, 9,905 were new customers – representing a 17% quarterly increase on the second quarter and a 34% rise compared with on Q3 2016.

The balance were 6,849 returning drawdown customers releasing housing wealth in instalments, and 1,138 further advance customers agreeing extensions to existing plans.

According to The Council, the growing range of products on the market and increasing consumer appetite to use housing wealth as a source of retirement finance can explain the steady increase in demand.

Equity Release Council chairman Nigel Waterson (pictured) said the growth in the market was indicative of a shift in the way consumers were approaching retirement.

“Property is, for many people, their largest asset and has the potential to play an increasingly important role in the future of retirement funding,” he said.

“The combination of rigorous safeguards and flexible products in today’s market is one reason why housing wealth is now being used to support a wide range of financial goals. These range from boosting pension income and supporting retirement lifestyles to funding home improvements and adaptations, consolidating debts and providing a living inheritance to younger generations”.

Missing state benefits

Just group communications director Stephen Lowe said that while, for some, equity release was a way of topping up their retirement or paying off debt, for others the money was deployed to improve their homes and lifestyles.

“Stringent safeguards surround the sale of equity release plans to ensure the plans meet the customer’s needs and that they fully understand the impact their decision may have on their inheritance, benefits and tax situation,” he said.

“In many cases, homeowners considering equity release find out during the process they are missing out on State benefits income that can make a huge difference to their lives.”

According to Lowe, almost two-thirds (62%) of those advised by Just found they were not receiving their full State benefits and that, on average, they were missing out on £576 a year.

“As a result of our robust advice process, we recommend to many people they should not proceed with equity release and consider other solutions instead,” he added.