Equity release lending on course to reach £4bn

Equity release lending on course to reach £4bn


The Equity Release Council (ERC) said this marked record lending for the sector. It added that this had been helped by pent up demand and improvements in product availability. 

So far, customers have accessed £3.46bn and the council said the market was on track to reach £4bn by the end of the year. 

Although the value of equity accessed in Q3 this was down two per cent on the previous quarter’s £1.17bn, it was up by 19 per cent annually. In Q3 last year, lending reached £963m.  

While the value released remained above £1bn, fewer new and returning customers were served during the period with a total of 19,300. This was down from 20,352 in Q2. The ERC said this indicated a continued return to pre-pandemic market activity, repeating sentiments made in its report for Q2. 

David Burrowes, chairman of the Equity Release Council, said: “While annual activity has hovered close to £4bn since 2018, the market hasn’t stood still and the available product range has more than doubled since then.  

“Homeowners in need of extra funds for later life are increasingly look to equity release as a positive step, in the right circumstances, to benefit from a source of wealth they have built up over many decades.” 


Borrower trends 

There were 10,023 new plans agreed in Q3, a small rise on the 9,898 plans agreed in the previous quarter. The number of new plans in the third quarter was also down three per cent year-on-year when activity was driven up by a backlog caused by the pandemic. 

Drawdown lifetime mortgages were the preferred option for borrowers, with 57 per cent of new customers choosing this option compared with 55 per cent in Q2. Around 47 per cent went for a lump sum lifetime mortgage. 

The average first instalment of a new drawdown lifetime mortgage was £86,337, almost flat on Q2’s £86,349. An additional £34,406 was held in reserve compared to £34,310 in the previous quarter. 

The average new lump sum lifetime mortgage reduced by six per cent quarterly to £121,464. The ERC said larger loans during Q2 were likely to be influenced by borrowers gifting family members with money to support house purchases during the stamp duty holiday or releasing equity to buy a property.   

The average lump sum was the highest recorded during any quarter before 2021 but was the lowest average for this year. The ERC said this was likely influenced by rising property prices and more affluent customers using equity release. 

The period saw 8,002 existing customers with drawdown lifetime mortgages withdraw from their agreed reserves. This was the second highest figure since the pandemic started but down from 9,382 during Q2 when the stamp duty deadline potentially encouraged gifting from reserves to support house purchases.  

Further advances were agreed for 1,275 existing plans, the highest level recorded in any quarter and was likely driven by people looking to maximise on increased property prices.  

Burrowes added: “The stamp duty holiday inevitably impacted consumer behaviour over the summer and into autumn, with average loan sizes and drawdown activity fluctuating. Looking ahead, the ability to gift money to family members and share the proceeds of long-term house price growth is likely to remain an attractive option.”