Equity release lending grew by 21 per cent in the first quarter year-on-year, the highest Q1 lending levels on record, boosted by the Financial Conduct Authority’s recent decision to reduce affordability assessments for lifetime mortgages.
In what marks the 25th anniversary of the first industry standards being developed for equity release, a total of £393.9m was lent over the first three months of the year, according to the Equity Release Council.
Over the course of the quarter, 5,175 new equity release plans were taken out - up 6 per cent from 4,880 in Q1 2015 - and this was also the first time the number of new plans topped the 5,000 mark in a Q1 since 2009.
The market share of drawdown lifetime mortgages increased slightly year-on-year and it remains the most popular product. The value of drawdown products accounted for 60 per cent of all loans, while the volume of loans was 67 per cent, up 1 and 2 per cent respectively from the first quarter of last year.
There were 3,450 drawdown loans agreed in Q1, up 9 per cent on the same period in 2015. Their value was £234.5m, up by more than a fifth year-on-year.
The value of lump sum mortgages accounted for 40 per cent of total lending in the first quarter and a third of the total volume of loans. The value of lump sum mortgages was £158.8m, up 19 per cent from Q1 2015.
Value of lending in Q1, 2003 – 2016 (£m):
Nigel Waterson, the ERC’s chairman, commented that the Financial Conduct Authority’s recent decision to reduce affordability assessments for lifetime mortgages was a positive development.
“As we look forward to the next 25 years, it is important now to maintain expert adviser support for customers as the sector grows, as well as continuing to innovate to satisfy customer demand, all the while preserving standards and consumer protections.”
Simon Chalk, technical manager for equity release at Age Partnership, agreed that the FCA’s announcement to waive affordability assessments on some plans, will help the equity release market to grow further.
“These moments are also pivotal in helping over-55s to access their existing wealth as they provide advisers with greater trust to look at innovative ways of exploring options for each individual.”
Steve Lowe, group communications director at Just Retirement, added that the results highlight not only the growth, but the growth potential for this market.
“With an increased number of people turning to equity release, we are likely to see new customer groups considering this product so the industry needs to continue to innovate and develop its offering.
“The recent announcement from the FCA on affordability and lifetime mortgages is a step in the right direction which will mean more people can benefit from using their housing equity.”
peter.walker@ft.com
