The latest quarterly figures from the Equity Release Council show the sector has continued to grow with the last three months up 44% year-on-year from the third quarter of 2016, when lending stood at £572m.
Nigel Waterson, chairman of the Equity Release Council, commented: “The sustained growth in housing wealth withdrawals is indicative of a wider shift in the way consumers are approaching their retirement planning, by taking a broader range of financial options into consideration.
He added: “Property is, for many people, their largest asset and has the potential to play an increasingly important role in the future of retirement funding. The combination of rigorous safeguards and flexible products in today’s market is one reason why housing wealth is now being used to support a wide range of financial goals.
“These range from boosting pension income and supporting retirement lifestyles to funding home improvements and adaptations, consolidating debts and providing a living inheritance to younger generations.”
Waterson has previously estimated that annual equity release lending could surpass £3bn this year.
Third quarter breakdown
Members of the council recorded a total of 17,982 customers between July and September, up 12% from the second quarter. Of these, 9,905 were new customers, representing a 17% quarterly increase from the second quarter and a 34% annual rise compared to the third quarter of 2016.
The remainder were made up of 6,849 returning drawdown customers releasing housing wealth in installments (up from 6,566 in the second quarter) and 1,138 further advance customers agreeing extensions to existing plans (up from 1,002 in the second quarter).
The growing range of products on the market and increasing consumer reliance on housing wealth as a source of retirement finance mean that third quarter lending activity has now risen by 82% in the last two years, up from £453m in the third quarter of 2015.
Continued rise in drawdown customers
A further shift towards offering more breadth across drawdown lifetime mortgages to reflect consumer demand has meant the proportion of new customers choosing this option over lump sum lifetime mortgages or home reversion plans in the third quarter of 2017 rose by nine percentage points to 77% from the previous quarter (68%) and 15 percentage points year-on-year (from 62%).
Drawdown products typically see customers releasing smaller amounts of equity to begin with (£64,793 in Q3 2017 vs. £100,389 via lump sum plans), therefore reducing the build-up of interest over the duration of the plan. It also provides customers with the flexibility to unlock further sums via future instalments as and when they need to.
Dave Harris, chief executive officer at equity release lender, More2life commented: “These latest record breaking results show the increased appetite among older borrowers to unlock the wealth tied up in their homes to help fund their retirement.
“With the level of activity this quarter up 44% year-on-year, the amount of lending during the first nine months of 2017 has already surpassed the £2bn lent at the end of last year, which is a fantastic outcome. Demonstrating the huge strides the equity release market has taken towards becoming a mainstream retirement solution.”
Alice Watson, head of marketing at Retirement Advantage Equity Release, was also clearly pleased by the figures but cautioned that “it is vital that the equity release industry does not take its foot off the gas and continues to innovate if it is to carry on growing.”