However, lenders have called on advisers to embrace the market to support the growth in customer demand.
Total lending between April and June increased by 12% compared with the first quarter of 2018 when it was £870m and by 39% year-on-year from £701m in the second quarter of 2017, according to the latest quarterly figures from the Equity Release Council.
This quarterly increase was broadly in line with the average 11% growth seen from quarter to quarter since the first three months of 2016.
Total customers served during the second quarter rose to 20,326 – up by more than 25% from the second quarter of 2017 and up 9% from the first quarter of 2018.
As a result, total lending in the first half of 2018 reached £1.84bn overall, up by 32% from the first half of 2017. The total number of customers served increased by 28% over the same period from 16,805 to 38,912.
New customer numbers grow while further advances dip year-on-year
The rise in activity during the second quarter was driven by 11,295 customers taking out new plans, compared with 10,195 in the previous quarter and 8,454 a year earlier.
More than three in five new customers chose drawdown lifetime mortgages, allowing them access to equity from their homes in multiple instalments over time, which limits the interest owed. Nearly two in five chose a lump sum mortgage to receive a single payout instead, the largest share since the first quarter of 2017.
The number of returning drawdown customers making withdrawals from their agreed ‘reserve’ funds also rose year-on-year in the second quarter. However, customers taking further advances on top of an existing plan dropped by 9% from the second quarter 2017.
Average plan sizes remain broadly consistent
The average amount of housing wealth unlocked by new customers fell slightly in the second quarter compared with the first quarter across both drawdown and lump sum lifetime mortgages. The average first instalment of a drawdown plan decreased slightly from £64,797 to £63,584, while the average new lump sum plan dipped from £96,483 to £95,991.
Total lending of £93m to returning drawdown customers was the largest quarterly amount on record – a result of the growing number of customers with these products. However, the average drawdown taken per customer in the second quarter fell marginally from £11,756 to £11,532.
Average further advances fluctuated more from the first to the second quarter, but this was influenced by the small number of people active in this part of the market and remained in line with averages seen since 2016.
Home reversion plans continued to make up fewer than 1% of new plans taken out in the second quarter of 2018, although lending in this part of the market exceeded £1m for the first time in two years since the second quarter of 2016.
Grow adviser numbers
Equity Release Council chairman David Burrowes (pictured) said: “The social utility of housing wealth is increasingly recognised at a consumer, industry and policy level. Property wealth has an important role to play as part of the solution to many pressing socio-economic issues, from boosting retirement incomes to funding social care and easing intergenerational pressures by helping people to pass on a living inheritance.
“Consumers are releasing money from their homes for a variety of reasons, and features like downsizing protection and repayment options mean today’s equity release product range is designed to evolve as people age and circumstances change.
“Growing choice and flexibility has propelled equity release into the mainstream consciousness, and it is crucial that consumers are encouraged to weigh up all the choices available to them, to help create a rounded approach to later life planning that considers property alongside pensions and other assets.”
Steve Ellis, CEO at Legal and General Home Finance, said £1bn of lifetime mortgage lending in a quarter was just around the corner: “We should expect to see a £10bn market within the foreseeable future and we need more advisers to come to market and start helping clients with lifetime mortgages.
“The customer demand is there, the lending capacity is there – as long as customers can access the right advice then the lifetime mortgage market will continue to thrive.”
Dave Harris, chief executive officer at More 2 Life, added: “It is hugely impressive that it has taken just five years for the industry to grow from lending £1bn a year to £1bn a quarter. If we continue at this rapid rate, we could be approaching an impressive £1bn a month in the next five years.
“Innovation and funding will be key to help ensure we are able to sustain this type and rate of evolution. It’s clear that there is an increasing pool of borrowers who are keen to release the wealth tied up in their properties, but they will need both guidance and support. A steady growth in adviser numbers will therefore be crucial to ensure the market can keep up with growing consumer demand.”