The Equity Release Council’s (ERC) Q3 report confirmed borrowers are returning to the market in signs of a ‘gradual but fragile road to recovery’, according to David Burrowes (pictured), trade body chair, with new lending down 58 per cent on an annual basis.
New customer numbers rose 10 per cent to 7,379 with total lending also up eight per cent to £716m over the third quarter, bolstered by 8,466 returning drawdown customers.
The number of active customers this quarter was very slightly up from 17,028 in Q2, although it remained down 33 per cent year-on-year from 25,519 in Q3 2022.
Burrowes said: “These figures suggest the process of building back is slowly underway in the equity release market, after a period where higher interest rates have prompted consumers and industry to reach for the ‘reset’ button.
“With customers starting to venture back, the market is at the start of a gradual but fragile road to recovery, with pent-up demand likely to emerge in future years as the interest rate cycle begins to turn again.”
Initial drawdowns
According to the data, the average initial drawdown is £63,238 and customers are borrowing an average lump sum of £94,806, both down roughly a third on an annualised basis.
While returning drawdown numbers are still 12 per cent down year-on-year, this part of the market has been the least impacted by the slowdown. This is likely due to existing customers being able to limit the impact of higher interest rates by borrowing incrementally, with their existing borrowing protected from rising rates.
Similarly to new customers, returning customers reduced their borrowing in Q3 compared to a year earlier, withdrawing £11,863 on average – down nine per cent from £12,968.
New customer numbers tumble by 45 per cent
The trade body said the market remains constricted at 2017 levels with new customers down 45 per cent and total lending down 58 per cent over the year.
However, data from Moneyfacts indicated that equity release product pricing improved from an average rate of 7.52 per cent in July to 6.63 per cent in September.
Burrowes added: “While the clock has been wound back on lending activity and loan sizes, product innovation has increased the flexibility of lifetime mortgages.
“New customers of plans that meet our high consumer standards can use voluntary repayments to keep their costs in check while existing customers are free to take extra instalments of money as they need it, safe in the knowledge their previous borrowing is fully insulated from rate rises.
“Looking ahead, we must be wholly committed as an industry to putting equity release in its proper context as one of a range of later life lending options and putting property wealth in its proper context at the heart of every retirement planning conversation.”
