The Equity Release Council said total lending hit £2.15bn as increasing numbers of consumers decided to unlock the value in their homes. Lending was 34% higher than in 2015 with an extra £542m borrowed, double the annual rate of growth.
The fourth quarter of the year was particularly strong, as lending increased 51% to £670m, up from £445m in Q4 2015. More than 8,000 new equity release plans were taken out during that period. Overall new plans across 2016 stood at 27,563: the highest amount since 2008.
Nigel Waterson, chairman of the Equity Release Council, said it was an historic year for the sector. “Passing the £2bn mark for the first time indicates that housing wealth is becoming an increasingly important focus of retirement planning,” he said.
“The market continues to become ever more competitive with growing choice and falling rates for customers a welcome consequence of moves by new and existing providers.”
Waterson said it is vital that this momentum is built upon so that more people have the information and advice on how to make the best use of their assets in later life.
Lump sum lifetime mortgages were increasingly popular, up 26% year on year and exceeding the growth of drawdown products, which rose 19%. They recorded their largest share of the volume of new plans (35%) since 2010.
This is likely to be influenced by the use of housing wealth to repay mortgage debt as well as meeting other financial needs.
However, drawdown products remain the most popular, with 17,882 new drawdown plans in 2016, accounting for 65% of the market.
Steve Ellis, chief operating officer for Legal & General Home Finance – which entered the market in 2015 – said he was delighted to see these levels of growth.
“More and more people are using the money tied up in their homes to fund a better retirement both for themselves and for the people that matter to them. We look forward to, and expect, further strong growth in the market in 2017.”
Alice Watson, head of marketing at Retirement Advantage Equity Release, said this is new territory for the industry. “In a year which included Brexit, the most momentous event since the financial crisis, equity release hasn’t just remained resilient. It has hit record highs.”
She added: “What’s most encouraging is that the growth of equity release fits with the way people are now planning for retirement. The holistic approach to thinking about finances, where all pots of wealth – including property – are taken into account, is becoming the new normal.”
Retirement Advantage said 57% of its customers took out an equity release product in 2016 to clear an existing mortgage, and 50% did so to make home improvements. Beyond that, 16% used the loan to fund a holiday and a further 16% extracted equity from their property to buy a new property.
The figures were released as advisers called for standalone equity release qualifications to increase levels of advice on the products.