Equity release lending reached record highs of £870m in early 2018.
The latest quarterly figures from the Equity Release Council revealed equity release lending more than doubled over the past two years, reaching £870m in the first quarter of 2018, up from £394m in the first quarter of 2016.
David Burrowes, chairman of the Equity Release Council, said more older homeowners were finding equity release a useful and flexible financial planning tool in later life.
He said: "While pensioners’ income is on the rise, a potential over-reliance on private pensions could lead to a retirement income shortfall in the future. New sources of income in later life are increasingly being sought, and this highlights the need for a rounded approach to retirement planning which considers all wealth, assets and product choices.
"Equity release provides financial help for consumers in a wide range of circumstances, including some looking to pay off interest-only mortgages and others wanting to make home improvements or adaptations and fund social care needs in the comfort of their own homes. It can also help financial issues across generations.
"With demand continuing to grow, equity release is providing solutions to a wide array of customer needs. As well as working closely with policy makers to inform decisions on social care funding and the single financial guidance body, the council continues to focus its efforts on upholding the highest standards of consumer protection that underpin confidence in the growing later life lending arena."
Drawdown products - which see smaller amounts of housing equity withdrawn initially, with an extra amount reserved for future use - were the most popular choice, with two thirds - or 68 per cent - of customers opting for this.
In the first quarter of 2018, new customers agreed drawdown plans with an average initial instalment of £64,797, a rise of 4 per cent from £62,359 on the fourth quarter of 2017 and 11 per cent from £58,466 year-on-year.
Among the one in three new customers opting for lump sum lifetime mortgages, the average amount of £96,483 was down 5 per cent from the fourth quarter of 2017 at £101,913 and broadly consistent with the first quarter of 2017 at £96,340.
The data also found nearly £10m of housing wealth was withdrawn a day from 1 January to 31 March 2018, compared to £4.3m in 2016.
Dean Mirfin, chief product officer at Key Retirement, said the figures highlighted the growing role housing equity was playing for those aged 55 and over who were looking to close the retirement funding gap, repay their interest-only borrowing or simply enjoy a better standard of living in retirement.
He said: "Whilst customer demand is driving new plan numbers and lending volumes this has been greatly helped by a very competitive market place with rates at their lowest levels ever. Rates fixed for life are now available from 3.59 per cent, compared to 5.5 per cent five years ago, putting todays lifetime fixed rates lower than many mainstream lenders’ variable rates.
"These figures – together with the trends that we are noticing internally at Key – suggest that while 2017 was a good year for equity release, 2018 has the potential to be an excellent one. I would not be surprised to see the amount released reach as much as £4bn by the end of the year."
aamina.zafar@ft.com
