Equity Release  

Equity release lending breaks new record

Equity release lending breaks new record

The equity release sector has witnessed another quarter of record growth as more and more people seek to unlock their housing wealth in later life.

Growth in the value of equity release lending was £701m in the second quarter - the highest figure in any single quarter since 2002, according to the Equity Release Council (ERC).

The recent surge means the value of lending has risen by more than a third when compared to the second quarter of 2016.

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Equity release – accessing the wealth built up in a home while continuing to occupy it – is being used for a variety of reasons, including helping younger family members to get on the housing ladder and repaying interest-only mortgages.

Of the 16,000 customers supported by ERC members between April and June, more than half (8,454) took out new equity release plans - a 27 per cent increase year-on-year.

Drawdown – where an initial lump sum is taken out, followed by smaller quantities when necessary - remained the most popular product type, chosen by almost seven in 10 (68 per cent) new customers.

Lump sum products, in which the whole sum is released at once, accounted for the remaining 32 per cent of new plans agreed.

ERC chairman Nigel Waterson said the figures showed “an increasing appetite among older consumers to utilise bricks and mortar for funding retirements”.

He said: “The retirement income pressures facing many savers in the era of defined contribution pensions and low interest rates are encouraging homeowners to consider a wider range of financial options. 

“Housing wealth - often people’s most valuable asset - is an important part of bridging the gap between the comfortable retirement people want and the retirement they can afford from their savings.

“It is vital we build on recent work by regulators and industry to encourage more joined-up thinking between related areas of financial services, so that consumers have the best support for their transition into later life.”

Steve Wilkie, managing director at equity release provider Responsible Equity Release, said much of the demand for his firm’s products came from people looking for a means of repaying their interest-only mortgage.

Mr Wilkie said: "Too many over 60s are treated as little more than a current account by their bank, refusing to lend to customers who would have historically been considered good security.

"As many mortgage customers on interest-only deals find themselves staring down the barrel of an expiry date with no solution, lifetime mortgage products offer a genuine and appealing alternative to regular mortgages, as affordability isn't a lending criteria.”