The volume of lifetime mortgage customers surged by 22 per cent in 2016, with a total of 27,534 new plans agreed, while the value of lending passed the £2bn mark, according to the latest market report from the Equity Release Council.
Meanwhile, buy-to-let - 2015’s fastest-growing segment - was pushed into second place, with a 16 per cent increase in volume over the course of last year.
Equity release rates continue to fall as new providers enter the market, seeing a significant drop of 51 basis points to 5.45 per cent between July 2016 and January 2017, the council reported.
The number of products available to customers has also continued to increase, offering more flexibility for older homeowners looking to access their housing wealth.
Drawdown mortgage products remained the most popular type of equity release plan in 2016, with 65 per cent of new customers opting for drawdown compared to 35 per cent opting for lump sum mortgages.
The proportion of lump sum customers increased slightly over the course of the year, increasing from 33 per cent in the first six months of the year to 37 per cent in the second half.
While the most popular age bracket to take out equity release products remains those aged between 65 and 74, the proportion of older borrowers continues to increase and the proportion aged 85 plus increased from 3 per cent to 4.1 per cent between the first and second half of the year.
Rate cuts across the market mean the rates on offer are now comparable to higher loan-to-value (LTV) mortgage deals.Dean MirfinNigel Waterson, chairman of the Equity Release Council, described 2016 as “a hugely significant year for the equity release sector”.
He added: “The sector is becoming increasingly mainstream amid growing appetite from older homeowners, reflected by the fact that lifetime products were the fastest growing segment of the mortgage market last year.
“Older homeowners are increasingly realising that there are a number of potential uses for their housing wealth beyond supplementing their retirement income, including re-investing in their homes and helping younger family members by providing a living inheritance.
“Greater flexibilities and growing competition mean the equity release product range continues to evolve and the council and its growing membership remain steadfastly committed to ensuring best practice in advice and product delivery to ensure good outcomes for consumers.”
Dean Mirfin, technical director of Keyretirement, said: “Equity release has more than doubled in value in the past five years and broken through the £2bn barrier highlighting it is now firmly established as part of the wider later life lending market as well as being a major contributor to improving retirement standards of living.
“Rate cuts across the market mean the rates on offer are now comparable to higher loan-to-value (LTV) mortgage deals while innovative products such as Shawbrook’s retirement mortgage for over-55s who cannot pay off interest-only debts demonstrate how the later life lending and equity release markets are working together.”
Paul McKay, director at Fareham-based Homeloan Express, said: “Last year was manic, but this year started off very slowly. There are a lot more brokers asking for promotions to do equity release, but the networks are keeping cagey on it because the FCA don’t want anyone dabbling in it.
“The products are excellent and are as safe as houses in the right hands, but they are not for everyone.
“A lot of enquiries are coming in from people in interest-only mortgages at the end of their term. Rates have dropped this year and lenders have improved their terms and conditions.
“This is good stuff. It is very rewarding to solve people’s problems and people are grateful for it.”
simon.allin@ft.com
