The amount of money unlocked using equity release has hit record highs, surpassing the £2bn mark for the first time in the sector’s history.
Over-55s accessed a total of £2.1bn in housing wealth in 2016, with £900m unlocked in the first half and £1.2bn in the second. A total of 27,500 new plans were agreed – the highest since 2008.
In further evidence of a boom in popularity, lifetime mortgages – the favoured method of equity release with about a two-thirds share of the market – grew more than any other type of mortgage last year (see Chart 1). This is from a very low base, however: lifetime mortgages continue to account for less than 1 per cent of the mortgage industry as a whole.
The increase in demand has been evident over the past two to three years according to Mike Richards, director at Mortgage Concepts Associates. He suggested that downsizing is becoming a less preferable option, and that many wish to access equity through want rather than need.
He said: “I’m seeing a client next week who has a £2m house with no mortgage on it, but wants to gift money to her children so that they can buy their own properties. They’re obviously children who are older, because she’s in her 70s, but it’s just to help them get the next step up.”
Despite this recent uptick in unlocking home equity, the sector is still trying to shake off previous reputational bruises. In 2012, consumer group Which? conducted a mystery shopping exercise that exposed instances of ‘poor advice’.
Nigel Waterson, chairman of the Equity Release Council, claimed those findings were “ancient history”.
“There may be a few people who still have some notion about past issues, but I think most people, regulators, the government and consumer bodies know that it’s long since cleaned up its act and is a very safe product,” he said.
craig.rickman@ft.com
