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Equity release lending reaches new £1.4bn record

Equity release lending reaches new £1.4bn record

The total value of equity release lending reached a record £1.38bn in 2014, according to the latest industry figures from the Equity Release Council, exceeding the previous high of £1.21bn in 2007 by 14 per cent.

Last year’s total is also a 29 per cent increase from 2013, bringing the equity release market back above pre-recession levels, as homeowners aged 55+ increasingly use their housing wealth to help with living costs in later life.

ERC’s figures showed the value of equity release lending totalled £365.7m in the fourth quarter, up 18 per cent from £310.2m in the same period during 2013.

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The number of new equity release customers also broke records, with more than 5,700 over-55s releasing equity from their homes in the last three months of 2014, the largest amount in a single quarter for six years.

The average value of equity release lending also hit a new milestone in 2014, reaching £64,787 - an increase of 14 per cent from last year which exceeds the previous record of £60,504 in 1998 by 7 per cent.

Two-thirds of new equity release customers chose drawdown products last year, in contrast to just 25 per cent of customers in 2006. Lump sum products now account for 34 per cent of new plans, while home reversion account for less than 1 per cent.

However, drawdown products account for a smaller share of the market by value (60 per cent or £825m during 2014), as these products allow retirees to take smaller sums when they need them, often allowing more housing wealth to be preserved.

Nigel Waterson, chairman of the ERC, said that the figures showed that equity release is proving to be a crucial tool for financial planning in retirement.

“The new pension freedoms won’t change the fact that many people do not have enough savings for later life. There is a danger that people’s pension pots will be ‘here today, gone tomorrow’ – but housing wealth is the one constant that many in this generation can rely on for support.

“Increasing awareness of the available products and their benefits means that equity release will continue to thrive in 2015 and bring more help to our ageing population. Continued collaboration with all those in the sector, including the regulator and government, will support further innovations and maintain consumer protections.

“With talk of mainstream lenders and new offers arriving in the market, we anticipate big things for equity release in the year ahead,” he added.

Alice Watson, marketing manager at Stonehaven, argued that to facilitate demand more advisers need to become qualified to give equity release advice and there needs to be a bigger commitment from the industry to support the product’s growth.

“With April 2015 pension reforms on the horizon, more advisers will need to become qualified in order to give holistic retirement planning advice. Hopefully these reforms while challenging will prove to be the catalyst for more advisers to undertake specialist qualifications.”

peter.walker@ft.com