The number of product options on the equity release market has more than tripled in the past 10 years as the sector continues to grow in popularity, according to data from the industry's trade body.
Clients can now choose from 78 options available from members of the Equity Release Council – up from 24 in 2007.
In the past year alone, the number of products has grown by more than a third (34 per cent), according to the council.
The increase in product innovation comes in response to growing demand for equity release products, as increasing numbers of people look to unlock their housing wealth in later life.
Total lending reached a record of almost £1.4bn in the first half of 2017 and could break the £3bn barrier by the end of 2017, the Equity Release Council said.
More than two-thirds (68 per cent) of current product options allow customers to make ad-hoc repayments free from early repayment charges to help reduce interest accrued over the lifetime of the loan.
Drawdown, which allows housing wealth to be withdrawn in stages, and inheritance protection, which enables the ringfencing of a guaranteed minimum amount of housing wealth to leave to loved ones, have also grown in popularity.
One in 10 products now allows for full or partial interest payments to be made each month, which either stops or reduces interest being rolled up into the loan with no risk of the customer defaulting on their payments, as they can switch to roll-up arrangements at any point.
Greater competition in the market continues to drive down rates, which dropped from an average of 5.45 per cent to 5.30 per cent between January and July.
The council stated a growing number of homeowners aged 75 to 84 are unlocking the wealth in their homes, with the proportion of new drawdown plans taken out by this age bracket increasing from 23.2 per cent in the first half of 2016 to 25.1 per cent in the first half of 2017.
The proportion of 75 to 84-year-olds taking out new lump sum plans rose from 12.3 per cent to 13.6 per cent during the same period.
Nigel Waterson, chairman of the Equity Release Council, said: “The explosion in product options over the past decade is testament to the work done by the sector to meet increased consumer demand with solutions tailored to varying customer circumstances.
“Importantly, such innovation has gone hand in hand with a continued commitment to consumer protection through regulated financial advice, product safeguards and independent legal advice guaranteed by members of the council.”
Alice Watson, head of marketing at Retirement Advantage Equity Release, said: “The amount of equity people own in their homes has grown to £2.6tn in 2017, representing a huge opportunity for people in the UK.
"Those over the age of 55 increasingly view this pot of wealth as something they can draw on to fulfil their desired standards of living, especially in retirement.
“The boon of rising levels of housing wealth and the reality of living longer in retirement is evolving customer attitudes. People want to release money in a way that suits them and that they’re comfortable with. In response, the past year has seen an explosion of equity release product innovation.
“There are now nearly 80 different plans available, giving people unprecedented levels of choice and flexibility.
"Borrowers can drawdown their money in increasingly flexible ways, as and when they need it. They also have greater control of their plans and can make ad-hoc early repayments – an option which is proving hugely popular.
“Not only can people release equity on their own homes, they can now also release equity on buy-to-let properties – an innovation Retirement Advantage recently introduced.”
| Product features – Autumn 2017 | % of total product choices with this feature |
| Voluntary/partial repayments | 68% |
| Drawdown facilities | 52% |
| Inheritance guarantee | 51% |
| Fixed ERC | 49% |
| Downsizing protection | 45% |
| Sheltered/age restricted accommodation | 42% |
| Interest payments | 10% |
simon.allin@ft.com
