Historic year for equity release as lending hits all time high

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Another record quarter for equity release activity in Q4 has pushed last year’s annual lending growth in the sector to its highest level since records began, according to figures from the Equity Release Council.

The total amount of housing wealth unlocked by over-55 homeowners reached £3.06bn in 2017 – the first time it has exceeded £3bn in a single year. The year-end figures represented a growth of 42% compared to £2.15bn during 2016.

In Q4, equity release lending plans totalled more than £833m, the highest level on record for any single quarter. The final three months of the year saw more than 10,000 new equity release customers, the first time this has happened in a single quarter.

These increases meant the total number of new equity release plans agreed in 2017 was up 34% on 2016, from 27,563 to 37,037 – the highest total on record.

Equity release became more popular as the year went on. Q1 saw £697m of lending in total to new and returning customers, in Q2 this increased to £701m, and in Q3, total lending surpassed £800m for the first time. Quarters two and three were both record-breaking at the time.

Overall, the sector supported almost 67,000 customers during 2017, with 25,794 existing drawdown lifetime mortgage customers returning to dip into agreed reserves, and 3,867 existing customers agreeing further advances on either lump sum, drawdown or home reversion plans. The sector also saw 37,000 new customers.

Drawdown lifetime mortgages were the most popular type of product, representing 75% of new plans agreed in Q4.

‘Changing retirement plans’

Equity Release Council chairman David Burrowes said the year’s results suggested consumers are changing the way they plan for retirement.

“Property is, for many people, their largest asset and has the potential to play an ever-greater role in the future to meet the challenge of ensuring effective later life funding. I look forward to working with our members and industry, regulators and government across 2018 to build on what has been a breakthrough year for the sector,” he added.

Just Group group communications director Stephen Lowe said the results suggested financial advisers are seeing more opportunities to use property wealth to help their clients as they move through retirement.

He continued: “The market has excellent growth prospects too, driven by the need for those heading into retirement to think about all their assets more holistically. Recent government figures, for example, showed that of the poorest fifth of retirees more than four in five owned their own homes and often the value will be far greater than for their savings or pensions.

“Access to pension cash won’t make anywhere near as much practical difference to them as having access to professional advice and a competitive equity release market.”