Those aged 55 plus unlocked a record amount of housing wealth via drawdown lifetime mortgages in the final quarter of 2015, pushing annual equity release lending to a new high of £1.61bn, according to the Equity Release Council.
Lending via drawdown products totalled £271m between October and December, the largest quarterly total since this type of lifetime mortgage first emerged in 2004.
In the fourth quarter, 70 per cent of new plans agreed were drawdown, up from 63 per cent in the third quarter.
Drawdown lending for the whole of 2015 was also the highest on record, at £961m, pushing the total up to £1.61bn, up 16 per cent from £1.38bn in 2014.
Last year saw more than 22,500 new plans agreed for the first time since 2008.
Both drawdown and lump sum products saw second half lending grow 21 per cent year-on-year, with drawdown passing £500m (£538m) for the first time in any half-year period.
The value of home reversion plans – £4.5m – was the most in any half-year period for four years.
At 22 per cent, the year-on-year lending growth rate in the final quarter was the largest of any quarter last year, despite a slight dip in quarterly lending from £453m in the third quarter to £445m.
Year-on-year growth in equity release lending
| Total lending | Lump sum lifetime mortgage lending | Drawdown lifetime mortgage lending | Value of home reversion plans* |
Q4 2015 | 22% | 18% | 23% | 326% |
H2 2015 | 21% | 21% | 21% | 190% |
2015 | 16% | 16% | 17% | 82% |
*High percentage changes reflect growth from a low base, with home reversions representing less than 1 per cent of total activity
Since falling to a post-recession low of £789m in 2011, annual equity release lending has more than doubled in the last four years and now exceeds its pre-recession peak (£1.21bn in 2007) by a third.
Over the whole of last year, drawdown lifetime mortgages accounted for two thirds of new plans agreed, while lump sum lifetime mortgages made up 34 per cent and home reversions are less than 1 per cent.
The Equity Release Council is set to announce new initiatives for advisers in the first quarter this year, as part of its work to promote best practice across the sector.
The council’s chairman Nigel Waterson said looking ahead, the challenge is to continue developing products which meet consumer needs while ensuring that innovation is combined with protection and long-term sustainability.
He said: “Housing wealth is often people’s greatest asset and it makes sense for equity release to be on every homeowner’s checklist to consider as part of their retirement and estate planning.
“At the same time, it is not suitable for every circumstance, which is why professional financial advice and independent legal advice are essential so that customers understand how the products work, and what they can offer,” he continued, adding that supporting advisers will be a top priority in the year ahead.
Stephen Lowe, group communications director at Just Retirement, said customers have a range of options when releasing value tied up in their homes, with the majority last year - seven in every 10 - choosing drawdown plans that allow withdrawals staged to allow flexibility, while minimising the overall cost.
He said: “Housing wealth should be a normal part of retirement thinking and we support proposals to make it a bigger part of the conversation, such as adding it to the guaranteed guidance now offered to all retirees.”
peter.walker@ft.com
