The average value of equity release lending has risen by 12 per cent over the first half of this year, compared with the 2013 average, according to research published today (24 September) by the Equity Release Council.
The Equity Release Market Report shows that the average value of equity release lending has risen to £63,741 during the first six months of the year and lending through lump sum products was up by almost four times as much as drawdown, at 22 per cent compared with just 6 per cent.
However, the typical value of equity released remains equivalent to less than a quarter of the average customer’s housing wealth.
The typical equity release customer is now approaching 71, whereas drawdown customers are, on average, three years older than their lump sum counterparts when it comes to unlocking their wealth.
The report said: “The fact that lump sums are sought out closer to the traditional retirement age shows their usefulness as a means of clearing an existing mortgage, repaying other borrowing or lining up a holiday or home improvement project upon leaving work.
“In contrast, the fact drawdown customers typically wait almost three years longer before accessing their housing wealth, suggests they are more likely to have experienced a post-employment income drop and use equity release to boost their finances.”
The report also revealed that having opted for equity release, a total house price growth of 40 per cent over a 16 year period would preserve the typical customer’s remaining equity, whilst 68 per cent house price growth would ensure it retains its value in line with 2 per cent annual consumer price inflation.
Moreover, the report said that national indices showed the average house price growth over 16 years exceeded 260 per cent and has never dropped below 112 per cent.
Geoff Charles, chief executive of equity release adviser firm Bower Retirement Services, said: “Poignantly and importantly, equity release products are being advised upon and not simply ‘sold’.”
“Even though equity release lending has increased 12 per cent over the last year, the typical value of equity released is still less than a quarter of the average housing wealth of customers.
“Most plans are also significantly short of the maximum 50 per cent + loan-to-value currently available through some products. These findings are further testament to the professionalism within this sector and certainly correspond with the experience of our advisers.”
Alice Watson, product and communications manager at Stonehaven, said: “In recent years, equity release products have become much more transparent and flexible, opening up the market to more people. Fears around withdrawing cash lump sums to boost income have traditionally centered around future concerns about the impact of interest roll-up.
“However, many products allow borrowers to make interest payments during the loan period which can reduce or eliminate this. Borrowers are also able to ring fence some of the value of the property.”
Helen Davies, head of equity release implementation at Partnership, added: “Over the last ten years, we have seen a significant amount of innovation in the equity release arena – not least the launch of the first enhanced lifetime mortgage – and we look forward to more people taking advantage of the benefits these products can provide.”
