Homeowners aged 65-74 driving uptake of equity release

Homeowners aged 65-74 driving uptake of equity release

Research from the Equity Release Council has shown that homeowners aged 65-74 were the driving force behind the growing popularity of equity release products in the first half of this year, accounting for a “record” share of new plans.

The latest equity release market report showed this age group saw a 5 per cent increase in customer numbers from the first half of last year to the first half of this year.

Across the market as a whole there was a 2 per cent annual increase, as more people use their housing wealth to boost finances in later life.

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The value of total lending also rose in the period half-on-half, up 11 per cent from £641m to £710m.

The Equity Release Council noted that customers aged 65-74 took out 58 per cent of new plans agreed between January and June this year, up from 56 per cent in the equivalent period last year, to the highest share since tracking began in 2011.

In terms of products, drawdown lifetime mortgages were the most popular, accounting for 65 per cent of new plans agreed in the first six months of this year, compared with 44 per cent during the equivalent period, when drawdown products were relatively new.

Those customers using drawdown products generally opted for smaller initial withdrawals of housing wealth typically, averaging £46,958 during the first half of 2015.

This was down by 2 per cent from the first half last year, despite the average customer’s house price rising 7 per cent over the same period; which potentially gives them more equity to draw on.

Around 35 per cent of new plans in the first six months this year were lump sum mortgages in contrast.

Customers seeking a lump sum are typically closer to the old default retirement age of 65, according to the Equity Release Council, and have seen their average age drop from 68.8 to 67.7 half-on-half.

The report said that these customers typically withdraw a larger amount, averaging £77,494 in the first half of 2015, which can help with bigger items of expenditure as they enter retirement, such as clearing an existing mortgage or other borrowing.

Nigel Waterson, chairman of the Equity Release Council, said: “As demand grows, it is vital that efforts are made to continue to uphold rigorous standards of financial and legal advice across the industry.

“With drawdown products having emerged as the majority preference, more recent innovations mean customers can opt for products that protect a minimum inheritance or enable monthly interest payments to begin with.”

He added that the prospect of more new providers and different funding options emerging will build on this and help the market to satisfy wider demand.