Key’s equity release market monitor found that new plan numbers rose by 25 per cent while the value of equity released grew by 32 per cent in the first half of this year (H1).
Remortgage transactions accounted for almost a fifth of borrowing with the total value at £3.43bn including existing customers during the period.
Plan sales totalled 25,448, while the value of new equity released rose 31.7 per cent to £2.556bn – a record high for new lending and plan sales in a six-month period.
Key, a specialist adviser in equity release, said a combination of flexibility and house price increases attracted new customers with average interest rates at 3.65 per cent, lower than 3.92 per cent recorded three-years ago.
The rising cost-of-living squeeze was blamed on £876m taken out in further advances, a 32 per cent increase from £666m during the first half of 2021. The average drawdown customer reserved £52,363 compared with £45,746 last year and took an initial advance of £58,115.
However, customers who took advantage of drawdown facilities during the last six months took out on average £11,406 which is lower than the £13,765 last year.
Rebroking and equity release
Low rates and increased product flexibility appeared to be encouraging more customers to refinance, with a 79 per cent year on year increase in the number of people remortgaging from 2,130 during the first six months of 2021 to 3,817 the same period this year.
Key’s data also showed an increase in the number of customers using property wealth for discretionary spending, but debt repayment is the major use of the money released – 57 per cent of customers used some or all of the property wealth to repay debt compared with 53 per cent last year.
The use of equity release for home and garden improvements which can be both discretionary as well as necessary, accounted for 37 per cent of product releases compared with 33 per cent in 2021, however, the amount spent also remained flat at seven per cent of the amount released.
Regional equity release figures
Key’s report found that use rose in every UK region. London was the only region to record a single digit increase in plan sales at 3.1 per cent although the value of new equity released rose by 12.2 per cent.
The biggest year-on-year rise in the total value of new equity released was in Northern Ireland where the figure trebled. Strong rises were seen in Wales where the total value rose by 73 per cent followed by Scotland on 67 per cent and Yorkshire and the Humber on 50 per cent.
Will Hale, chief executive at Key, said: “As an industry, the first half of the year has seen the market return to growth as we work to develop and grow to better serve over-55s homeowners. With the cost-of-living crisis very much at the forefront of people’s minds, we’ve seen a continue focus on the management of both secured and unsecured debt – although the proportion of people who include some discretionary spending has increased.
“While pandemic and the cost-of-living crisis has affected all age groups, it is particularly critical in this market that we understand our customers’ needs and recognise their vulnerabilities. You can only take out equity release with the support of a specialist broker as well as independent legal advice and choosing to start that conversation will help people to find the right option for their individual circumstances now and in the future.”
