Over-55s are borrowing lower sums with equity release, although the number of customers taking out a loan has increased, according to a report by equity release adviser Key.
The equity release market monitor report, out last week, showed plan sales totalled 11,881 in Q1 2020 - a 6 per cent rise from 11,190 in the same quarter last year.
Meanwhile, the amount of equity released in the first quarter of this year stood at £805.2m, a drop of 3.8 per cent from £839.6m in Q1 2019.
According to Key, the changes were partly caused by the rise in sales of drawdown plans, where borrowers take an initial lump sum with the option to withdraw additional amounts later.
Sales of drawdown plans rose to 72 per cent in Q1 2020, compared with 66 per cent in the same quarter last year.
Will Hale, CEO at Key, said: “While we are finding an increased number of people using equity release, they are taking out less and using more drawdown products to help future proof their later life finances whilst mitigating the impact of roll-up interest.”
The report from Key also found that 63 per cent of borrowers used equity release for home and garden improvements, although this only accounted for 17 per cent of the amount spent.
Mr Hale said this suggested that home and garden improvements were popular, but “not typically the driving force” behind the decisions to release equity.
Analysis by Key found that 37 per cent of all equity released was used to repay a mortgage or unsecured debt.