According to the Key equity release market monitor for 2021, this was driven by rebroking activity which rose 174 per cent on 2020.
Some 5,295 borrowers remortgaged onto lower rates last year, compared with 1,930 remortgage cases in 2020. The average customer moved from an interest rate of 5.1 per cent to 3.6 per cent.
The focus on remortgage activity was also evidenced by the small rise in the number of new plans completed during the year, which rose by four per cent to annually to 41,991.
Additionally, existing customers took out an additional £494.48m in drawdown and further advances.
Drawdown plans accounted for 74 per cent of sales last year compared with 70 per cent in the previous year, while lump sum mortgages had a 26 per cent share of the market.
Market growth driven by withdrawals
During the year, a fifth of equity release plans were used to support family, down on the 27 per cent who used it for gifting in 2020. Some 34 per cent of plans were used to repay residential mortgages or remortgage existing equity release borrowing, a rise on 29 per cent in the previous year.
An average £104,792 was released per borrower last year, a 23 per cent increase on the amount released by equity release customers in 2020 and 37 per cent up on 2019.
Will Hale, CEO at Key, said: “To record this type of growth against the backdrop of a pandemic suggests that the equity release market is starting to live up to the potential that we have been highlighting for so long and is becoming a true later life lending market.
“We’ve seen a subtle shift away from discretionary spending with more customers focusing on using their housing equity to improve their financial resilience by repaying or remortgaging borrowing while others have concentrated on supporting family.”
He added: “The growing desire to move existing equity release borrowing to a better rate has been a feature of 2021 and we see this becoming an increasingly normal part of the market.”
Supplementing pension income
Kay Westgarth, head of sales, at Standard Life Home Finance, said remortgaging existing equity release customers was now a key feature of the market as people realised the benefits of moving to a plan with better rates and flexible conditions.
She added: “With the Pension Policy Institute suggesting that there will be more pressure on pension income than before, we anticipate that equity release and advisers in the market will need to play a more active role in many peoples’ retirement planning over the next few years.”
Jim Boyd, CEO of the Equity Release Council, said the report highlighted a milestone year for the equity release market and demonstrated the important role of housing wealth for later life planning.
He added: “As people face up to cost-of-living pressures and find their pension income needs a boost, it’s vital to consider all financial options and bear in mind how circumstances may change in future.”