In its autumn market report, released last week (September 29), the council highlighted that average product rates rose from 4.10 per cent in January to 5.74 per cent in August of this year.
However, it noted this was a lower increase than for many other mortgage products and that the average customer secured a significantly lower rate of 3.71 per cent in the first half of this year.
At the same time, the product range in the market dipped from 661 in January to 595 in August as lenders consolidated their offerings. The report did note however, that the range remains eight times larger than it was five years ago.
In total, over 47,300 customers used equity release products in the first half of the year, a 32 per cent increase from this time last year.
The report highlighted that as the market is typically busier in the second half of the year, by the end of 2022 it is reasonable to expect that over 100,000 new or existing customers might make withdrawals from their property wealth.
If this happens, it would be the first time in any year that the number of customers has reached six figures. Comparatively, the total number of customers for 2021 was 76,154.
Commenting on the market, chair of the Equity Release Council, David Burrowes said the financial services industry needs to work more closely together to deliver better outcomes for clients.
“Equity release should neither be a default option or last resort; it should routinely be considered, alongside potential alternatives, with both short and long-term financial goals in mind.
“This can only happen if different areas of the UK’s financial services market work much more closely together than they have been used to doing in the past.
“We must get to a point where a homeowner can be confident that, whether they are making remortgage, pension or inheritance plans for later life, they will be signposted to consider where their property wealth fits into the picture and not miss out on an option that could improve their quality of life,” he said.
Lump sums increase in popularity
Customers’ product preferences for the first half of this year saw more people opt for lump sum lifetime mortgages compared to last year, with the split between them and drawdown lifetime mortgages now almost equal.
Commenting on this shift, Just Group communications director, Stephen Lowe said the firm expects to see increasing numbers of people using equity release “to provide extra income or generate lump sums, for helping people gift money to family and plan for inheritances”.
Drawdown lifetime mortgages made up 49 per cent of new plans agreed in the first half of this year, while 51 per cent were lump sum lifetime mortgages.
Average loan sizes and average property values have also increased among new customers since last year, a trend the Equity Release Council said is likely influenced by growing house prices, which have given people more equity to draw on.
“We continue to see more and more wealthy homeowners using borrowing against their property assets as part of their estate planning, retirement income planning, or simply as a way to redistribute their wealth to the younger generations,” Knight Frank head of later life, David Forsdyke said.
Forsdyke added that he was encouraged to see high net worth individuals’ make use of equity release in their financial planning.
The typical customer has a higher value property to draw on than the average UK home, and typically draws on less than a third of their property wealth with a loan to value of 30-31 per cent.
The average UK house price for the period sat at £279,349, while the average customer taking a new lump sum lifetime mortgage owned a property worth £441,270 and the average property value for a customer taking a new drawdown lifetime mortgage was £423,556.
Inheritance
Elsewhere in the report, the council also “strongly encouraged” all potential customers to discuss their interest in equity release with their families or will beneficiaries.
It noted that equity release products typically result in a low level of complaints to the Financial Ombudsman Service (FOS), with its analysis of published Fos decisions identifying 35 complaints during the first half of 2022.
Of these, four were upheld and found in favour of the customer. Of the complaints, around seven in 10 were from family members or executors, rather than the customer.
jane.matthews@ft.com
