A total of 8,351 new equity release plans were agreed in Q1 2017. This was 61% higher than the 5,175 recorded in Q1 2016. The total value of equity release lending in Q1 reached £697m, up by 77% on the £394m recorded in Q1 2016. In both cases, the year-on-year growth is the highest seen in any quarter since records began in 2002.
This is the first time since 2003 that the equity release market has started a new year stronger than it finished the previous one. The figures from the Equity Release Council show that drawdown remains the most popular product type, although Q1 saw significant growth in lump sum activity with these products accounting for 40% of the new plans agreed.
Nigel Waterson, chairman of the Equity Release Council, said: “The early months of 2017 have bucked the seasonal trend of a slower start to the year, with both new customer numbers and total lending reaching record levels. Alongside this, the annual rate of growth is also the fastest that the sector has seen, as equity release continues its progress to becoming a mainstream retirement product among older homeowners.”
Dean Mirfin (pictured), technical director at Key Retirement, believed the growth in demand for lump sum products was driven by the desire to pay off interest-only mortgages and felt this area of the market would get bigger in the months ahead.
He commented: “Interest only mortgage maturities are also beginning to impact the sector for those needing a repayment solution, but we are only at the start of the first major wave and so expect this to provide significant growth in the sector.”
Talking about the recent strength of the market, Mirfin added: “Our own research shows that awareness levels of equity release are very high. We have just done some research around gifting where we found over 60% of those asked were aware that equity release could be used for this purpose. Historically we would have expected a lower percentage. Greater awareness is driving more competition in the market than we have seen for many years and this is making rates more competitive and encouraging lenders to introduce new features to their products.”
In recent weeks, Responsible Lending announced plans to enter the equity release market later this year having gained regulatory approval to do so at the end of February.
Key Retirement Group has also been purchased in the last week by Phoenix Equity Partners, and the new deal will see the lender seeking to expand its offering over the coming years.