Lending in January to March rose to £870m which was up 25% on the same period last year, while customer numbers also soared by 22% to reach 10,195, the Equity Release Council (ERC) revealed.
Last year the market broke the £3bn barrier for the first time with the previous quarterly record of £838m registered between October and December.
This has prompted many within the industry to suggest the market could hit £5bn within a couple of years.
Illustrating the sharp growth of the market, Q1 lending was more than double that in Q1 2016 while customer numbers were 97% higher.
Drawdown and innovation leading market
The ERC noted that increased demand has been met by an increase in product options available to consumers, which rose from 69 in January 2017 to 86 in January 2018.
It added that competition has driven greater innovation with new flexibilities coming to market as 70% of product options now offer consumers the choice to make ad-hoc, penalty-free voluntary or partial repayments of their loan.
Drawdown lifetime mortgages continue to be the most popular product choice with 68% of customers opting for this arrangement.
New customers in Q1 2018 agreed drawdown plans with an average initial instalment of £64,797, a rise of 4% from £62,359 on Q4 2017 and up 11% year-on-year.
Among those opting for lump sum lifetime mortgages, the average amount of £96,483 was down 5% from Q4 2017 of £101,913, but broadly consistent with Q1 2017.
Increasingly valuable income source
ERC chairman David Burrowes (pictured) noted that new sources of income in later life were increasingly being sought, highlighting the need for a rounded approach to retirement planning.
“Equity release provides financial help for consumers in a wide range of circumstances, including some looking to pay off interest-only mortgages and others wanting to make home improvements or adaptations and fund social care needs in the comfort of their own homes,” he said.
“It can also help financial issues across generations. Given that nearly 70% of all homeowner equity belongs to households aged 55 and over, it is inevitable that housing wealth will need to be used to help get the next generation onto the housing ladder.
“Equity release provides a valuable mechanism to provide this as a living inheritance,” he added.
Potentially excellent year
Key Retirement chief product officer Dean Mirfin highlighted that rates being at their lowest levels ever was a boost for customers and that he expected the growth to continue.
“Rates fixed for life are now available from 3.59%, compared to 5.5% five years ago, putting today’s lifetime fixed rates lower than many mainstream lenders’ variable rates,” he said.
“These figures – together with the trends that we are noticing internally at Key – suggest that while 2017 was a good year for equity release, 2018 has the potential to be an excellent one.
“I would not be surprised to see the amount released reach as much as £4bn by the end of the year,” he added.
Retirement Advantage Equity Release head of product and marketing Alice Watson added that the industry could not rest on its laurels to maintain the growth and service to customers.
“The industry must make sure that product innovation does not let up if growth is to continue,” she said.
“For this to happen, listening to the changing needs of customers is vital. Financial advisers also have a critical role to play in helping clients find the right products to suit their circumstances and to help them achieve their retirement aims.”