The Equity Release Council’s (ERC’s) market statistics for Q4 and the full year 2021 showed that the total lending last year included £4.3bn in new plans and £500m from returning customers.
Annual equity release lending also exceeded 2018’s record of £3.94bn which the ERC said was influenced by growing choice and competition in the market, the strength of the housing market, and people seeking additional sources of funds for later life.
Over the year, the market served 76,154 customers, which was a four per cent increase on 2020’s figure of 72,988. However, it was below the peak in 2019 where 85,497 borrowers opted for equity release.
Of these, there were 40,964 new plans agreed, an increase of two per cent from 40,337 in 2020. This was also below levels seen in 2019, which recorded 46,397 new plans and 2019 which recorded 44,870.
Product trends
Lump sum lifetime mortgages made up 43 per cent of new plans agreed in 2021, matching the figure recorded in 2020 which was the largest annual share of market activity since 2009 when this reached 44 per cent of the market.
The ERC said this could be attributed to customers with existing residential mortgages, including interest-only loans, reaching maturity in later life.
New customers agreed similar amounts of borrowing via drawdown and lump sum products during 2021. The average lump sum plan was £124,990, while the average drawdown plan featured an upfront amount of £89,786 with £34,950 held back for future use, totalling £124,735.
Across 2021 as a whole, 30,521 returning drawdown customers made use of the ability to draw funds from their agreed reserves, up from 28,902 in 2020 but just below the 36,426 seen in 2019.
For the full year, 4,669 customers extended their existing plans, which the ERC said may reflect the fact that homeowners had more equity to draw on due to rising house prices.
Q4 activity
The number of new and returning equity release customers served in Q4 reached 19,975, up from 19,300 in Q3 2021 and 19,333 in Q4 2020. Customers borrowed £1.34bn of property wealth during the period, including £1.2bn in new plans and £153m in drawdowns or further advances.
According to the ERC, Q4 2021 was the busiest period on record for lending activity, surpassing the £1.17bn recorded in Q2.
Lenders agreed a total of 11,013 new plans between October and December, making Q4 the busiest quarter of the year.
November saw the most equity release activity, with 4,634 new plans agreed compared to October 2020’s peak of 4,164. Activity slowed in December with 2,890 new plans taken out, which made it the quietest month of the year.
Some 61 per cent of new customers opted for drawdown lifetime mortgages in Q4, the highest percentage of the year and up from 59 per cent in Q4 2020.
New customers taking out drawdown plans in Q4 increased their total borrowing by 18 per cent compared with Q4 2020, with an average of £96,699 taken upfront and £35,532 reserved for future use. New lump sum plan sizes also rose 20 per cent over the same period to £125,911.
The period saw 7,571 existing customers with drawdown lifetime mortgages make use of their agreed reserves, which was a five per cent decline on Q3.
The average instalment taken by returning drawdown customers was £12,501 in Q4, up from £11,476 in the previous quarter.
Further advance activity increased in the last quarter of the year, with 1,391 extensions agreed. This was up on the 1,275 seen in Q3 and the 975 recorded during the same period in 2020.
David Burrowes, chairman of the Equity Release Council, said: “Cost of living pressures are just one of many reasons why homeowners are choosing to cash in on years of wealth accumulated in their homes. Increasing loan sizes partly reflect the rise in house prices and a more affluent type of customer using lifetime mortgages to plan their finances or gift a living legacy to family members.
“Having proved itself to have solid foundations through a period of uncertainty, the equity release market’s return to growth has just as much to do with trust and innovation as it does with external factors as households look to manage their finances in later life.”
He said equity release products had evolved in recent years, with new providers and features adding to the product’s appeal.
Burrowes added: “Increasingly flexibility has brought lifetime mortgages closer to their residential equivalents, by offering capital or interest payment options alongside long-term, time-honoured protections against rising interest rates and negative equity.”
