Mortgages  

Equity release sales continue to soar

Equity release sales continue to soar

Homeowners over the age of 55 withdrew a record £8.2m of housing wealth every working day from April to June, as quarterly equity release lending surged past £500m for the first time since the Equity Release Council began keeping records.

The total of £514.4m of housing wealth unlocked during the second quarter of 2016 was up 34 per cent annually from £384.3m during the same period in 2015.

Total lending for the quarter surpassed the previous quarterly record of £452.6m in the third quarter of 2015 by 14 per cent.

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This means that the three busiest quarters for equity release lending have all come within the last 12 months.

Over-55s increased appetite to use housing wealth has been supported by new providers and choice of products this year.

In addition, the market received support from the regulator in April, with the amendment of legislation to allow optional interest repayments to be exempt from mortgage affordability rules.

ERC figures showed the biggest percentage growth in the value of lending during the second quarter was for lump sum lifetime mortgages – typically involving a larger release of housing wealth in a single payment – with a 37 per cent (£56.8m) increase from £152.1m in the second quarter last year, to £208.8m this year.

However, lending via drawdown lifetime mortgages – allowing consumers to make multiple withdrawals of equity as and when needed – continued to account for the larger share of the market, growing 31 per cent (£72.4m) from £231.6m in the second quarter of 2015 to £304.0m in the second quarter of 2016.

This annual growth rate was the highest seen in four years, since the second quarter of 2012, during the UK’s recovery from recession.

Home reversion plans also experienced an increase in the second quarter, with the total value of activity more than doubling year-on-year from £623,647 in the second quarter of 2015 to £1.5m in the second quarter of 2016.

Looking at new customers’ product choices, more than two thirds opted for drawdown products in the second quarter, up from 65 per cent a year earlier, while the share of lump sum products dipped slightly from 35 to a third.

With market activity having grown significantly during that time, the number of new drawdown plans agreed in the second quarter was up 27 per cent year-on-year, compared with 16 per cent for lump sum plans.

Overall, it meant the total volume of new plans agreed across the whole market in the second quarter of 2016 was up 23 per cent year-on-year; the highest annual growth rate in nearly 13 years since the third quarter of 2003.

ERC chairman Nigel Waterson said growing demand from consumers since the recession has been met by a concerted effort from the sector to grow the range of available products and the reach of specialist advice.

“Looking ahead, this work will continue with an increasing focus on building relationships within the sector and with related markets such as residential mortgages and later life planning, so consumers can be referred for advice on equity release when it can help their circumstances,” he stated.