The Key Market Monitor for Q1 showed the value of equity was the highest on record and that on average, homeowners unlocked £111,500 in property wealth apiece, which was also a new high.
Additionally, 21.4 per cent more plans were sold during the period than last year, totalling 12,551.
Key said the strength of the housing market allowed existing borrowers to release a further £373m in further advances or drawdown.
Remortgage activity rocketed during the period, as a healthy 1,789 cases were completed – a 78 per cent rise on Q1 last year.
On average, remortgaging borrowers moved loans of £121,073 over from an interest rate of five per cent down to a rate of 4.1 per cent.
More options were available to equity release borrowers too as there were 1,557 plans on the market, around three times last year’s 518.
Kay Westgarth, head of sales at Standard Life Home Finance, said: “While younger age groups may be watching the recent significant house price inflation with frustration, over-55s have released £1.39bn worth of housing equity in Q1 which has been used to support themselves and their wider families.
“With over-55s – especially those on fixed incomes – becoming increasingly aware of the impact of inflation, the focus has been on financial resilience and increasing disposable income.
“Though many customers are using housing equity to ward off the cost-of-living crunch, it’s important to avoid generalisations, and remember that having the opportunity to use some of the proceeds for discretionary spending and family is a focus for many. Product innovation will be key to ensuring the needs of all retirees are met.”
Equity release usage
The proportion of customers using equity release to repay their mortgages hit an all-time high of 42 per cent, up from 17 per cent last year which Key attributed to people attempting to manage their expenses amid the rising cost of living.
The proportion of borrowers using equity release to repay unsecured debt rose from 27 per cent last year to 29 per cent in Q1 2022.
Some 15 per cent of borrowers used property wealth to help families, down from 21 per cent last year. However, this still accounted for 19 per cent of the equity released in value.
A further 11 per cent unlocked property wealth to fund holidays, up from one per cent last year when Covid-19 restrictions were still in place. In value, however, this was a nominal rise from one per cent to two per cent.
Dave Harris, CEO of More 2 Life, said: “While there may be growing caution in the housing market, the equity release sector has enjoyed a buoyant start to the year.
“In part, the rebound in the equity release sector following the pandemic could be down to those in later life choosing to unlock their equity to boost their income as the cost of living rises and there are more opportunities for discretionary spending.
“Even as the base rate and inflation continue to climb, these are all signs that equity release is continuing to play an important role in retirement plans today, and our market clearly remains resilient and growing in 2022.”
Differences in age
Key’s analysis showed that the use of equity released differed by age group.
Some 45 per cent of those aged between 55 and 64 used the money to pay off mortgages. This was despite having a smaller outstanding average mortgage debt of £63,627 compared with a £114,922 debt for those aged between 65 and 74.
Borrowers aged 75 and over have an average mortgage debt of £97,681.
Will Hale (pictured), CEO at Key, said: “With headlines suggesting that the UK is facing a challenging inflationary environment, we are seeing older customers increasingly choosing to manage their debt using equity release.
“As an industry, we need to continue to rise to the challenge of supporting an ever more diverse universe of clients by building on the evolution that has seen huge growth in the number of products and features available as well as more choice in how customers access specialist advice.”
