Equity release is providing over-55s with a financial boost worth more than 100 weeks of full-time take-home pay, according to the Equity Release Council’s latest market report.
The average initial amount of housing wealth unlocked by equity release customers via drawdown mortgages in the second half of last year was £49,607 – the equivalent of 109 weeks or more than two years of pay.
The average lump sum mortgage withdrawal was £81,324 – more than the average full-time worker takes home in three years, or 179 weeks.
Also during the second half of 2015, every region in England saw drawdown mortgage customers take an initial advance worth more than a year of take-home pay for the average full time worker in that region.
In London, drawdown customers withdraw the equivalent of 130 weeks of pay – £72,858.
For lump sum customers in all UK regions except Scotland – where 91 weeks worth of pay is released – the average withdrawal of housing wealth was equal to more than two years of take home pay.
London again had the greatest sums taken out – £209,739 or 373 weeks of income.
The five years from 2011 to 2015 have all seen a surge in equity release activity during the second half, compared with the first half of the year.
The second half of last year saw a 26 per cent increase in the value of lending compared with the first, from £710m to £898m.
This is the biggest half-year growth rate of the post-2008 era, beating a previous high of 24 per cent between the first and second half of 2013.
Growth rate of equity release market activity – H1 to H2
| Value | Volume |
2015 | 26% | 21% |
2014 | 16% | 12% |
2013 | 24% | 14% |
2012 | 18% | 12% |
2011 | 15% | 13% |
2010 | -4% | -5% |
2009 | -2% | -3% |
Source: Equity Release Council
Nigel Waterson, chairman of the Equity Release Council, said greater choice from new and existing providers is driving the market, with product features emerging that allow more freedom to make capital repayments and pay interest on some loans.
“We expect this trend to continue, and the challenge for industry and regulators is to ensure product innovation is combined with consumer protection and long-term sustainability.
“Building closer relationships with the mortgage and later life markets is also crucial so that, where appropriate, more consumers can access specialist financial and legal advice to make an informed choice about equity release.”
Simon Chalk, equity release specialist at Age Partnership, said as the repercussions of the Mortgage Market Review’s tougher lending criteria continue to stack against older borrowers, more customers in the 55 to 64 age bracket are opting for equity release as an alternative to more traditional routes.
He said: “This is especially the case among those who took out interest-only mortgages and are looking for an alternative method of repayment.
“Flexible drawdown plans mortgages, in particular, are becoming an increasingly popular type of lifetime mortgage as they allow borrowers to dip into their housing wealth as and when needed, while leaving the remaining amount intact.”
peter.walker@ft.com
