The Key Market Monitor covering 2023 showed that, within this, 51 per cent of sales were for drawdown equity release plans and 48 per cent were for lump sum mortgages. 

The value of new lending for both lump sum and drawdown plans declined by 62 per cent to £2.1bn, while the total amount lent was £2.7bn last year. 

Some £411m of drawdown was provided, as well as £162m of further advances from existing plans. 

Although the equity release market was impacted by base rate rises and the aftermath of the mini budget, Key said there had been a “good boost in consumer demand” at the start of this year. 

The firm said product innovations such as the introduction of payment term lifetime mortgages (PTLTMs) were “very encouraging”. 

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This week, More2life announced it had launched a flexi PTLTM, which allowed borrowers to access a higher loan to value (LTV) rate than usual. At the end of last year, Legal and General (L&G) Home Finance also introduced a PTLTM, which it said would bridge the gap between a traditional and retirement interest-only (RIO) mortgage. 

Key said the flexibility offered by lifetime mortgage providers was positive, as 86 per cent of plans sold last year had fixed early repayment charges (ERCs) and 74 per cent had downsizing protection. 

 

Equity release borrower behaviour 

On average, borrowers released £74,148 from their homes, compared to £106,806 the year before, while the average interest paid went up from 5.7 per cent in 2022 to 6.63 per cent in 2023. The average age of borrowers increased slightly from 71 to 72. 

Some 72 per cent of the equity released from their homes was to make mortgage and debt repayments, which was up from a proportion of 67 per cent the year before. Some 12 per cent of the money was used to remortgage existing equity release plans. 

Of the money released, 16 per cent was gifted to family, up from 14 per cent the year prior. Just three per cent was used for a holiday. 

More than a tenth – 12 per cent – of the equity released in 2023 was used for home improvements. 

 

Sector has ‘reasons to be cheerful’ 

Will Hale (pictured), CEO at Key, said: “The later life lending sector does have some real reasons to be cheerful in 2024. We have already seen a good boost in consumer demand as the new year gets into full swing. 

“We have seen the first shoots of some interesting product innovations that can provide a real boost for market growth, whilst addressing unmet customer needs. The variety of products that offer repayment options has increased, and these provide the potential for customers to both release more cash in order to meet all their needs and to reduce their cost of borrowing – two things that have been barriers to volumes post-2022.

“In addition, towards the end of 2023, we saw gilt rates drop to below four per cent, and as base rates drop in 2024, I am confident this will breathe new life into the core equity release market. We should feel confident the later life lending market is set for a return to growth in 2024.”