According to the latest quarterly report from the Equity Release Council (ERC), the total lending figure is up 7% quarterly and Q1 is the fourth successive quarter of growth recorded by this market.
The report said the market growth was “driven by a significant increase in new customers taking lump sums supported by improved product choice and positive annual house price growth”.
The ERC said new plans had risen by around 14% annually to around 5,342.
The report stated that total plans came to around 14,350, which is static year-on-year at 1% up.
Returning drawdowns came to 7,684, a slight fall of 1% year-on-year, while further advances contracted by around 25% annually to 1,324.
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The report added that the average amount borrowed by 47% of customers who chose a lump sum was £127,414.
This is a rise of 11% on the previous quarter and 23% up on the same time last year.
The new initial drawdown came to £39,764, which was 17% up on last year, while a new drawdown reserve facility stands at £61,194, a rise of 11% annually.
The returning drawdown average loan size was estimated at £13,872 and the lump sum further advance average loan size was £32,621. These are rises of 8% and 93% year-on-year.
The average loan size for a drawdown initial further advance was £27,125 and a drawdown further advance reserve facility stood at £6,752. The former is up 18% and the latter is a 2% rise year-on-year.
Product availability “remained good”, with over 1,200 plans for advisers to select from. The average APR of new products in the first three months of the year is 7.15%, which is up from 6.67% in the same period last year.
David Burrowes, chair of the ERC, said growth has been “driven by more new borrowers accessing greater amounts of housing equity to manage mortgage debt, boost income and help their wider families”.
He continued: “Fewer existing customers accessed drawdown or requested further advances as older homeowners adopted a cautious approach to additional borrowing given the current world economic climate.
“Gilt rates, which govern interest rates on lifetime mortgages, have been steadily increasing since January 2024, which has impacted rates, but lenders are working to mitigate this by encouraging the use of flexibilities such as the ability to make ongoing repayments.”
Burrowes said Q1 “typically sets the agenda for the remainder of the year and the figures released today are a testament to the resilience of the market and its ability to adapt to consistently shifting economic conditions”.
“With the FCA due to launch a public consultation into lending into later life in June, this sector is likely to be in the spotlight for much of 2025 and today’s figures highlight its growing momentum as lenders, advisers and lawyers work together to support customers,” he noted.
Equity release growth ‘positive’ but work needed on adviser awareness and lender pullback
Sadna Zaman, proposition development manager at Canada Life Home Finance, said it was “positive to see that the equity release market is showing continued signs of growth”.
“With more people living longer and traditional retirement income sources under pressure, it’s clear that many homeowners are proactively exploring property wealth as a valuable tool to achieve financial stability and aspirations in later life. Furthermore, evolving financial planning considerations, such as forthcoming changes to inheritance tax, may also be prompting more homeowners to consider equity release as a strategic option,” she explained.
Zaman said uncertainty around the economic outlook could be prompting more homeowners to “reassess their long-term financial strategies”.
“Equity release is increasingly being recognised as an attractive option for those looking to manage both current needs and future financial planning.
“Equity release offers valuable flexibility, and product innovations have only enhanced its appeal. It’s encouraging to see that growing numbers of customers are recognising these benefits – as reflected in the market data, which shows a significant year-on-year increase in new customers choosing equity release solutions,” she noted.
Dave Harris, CEO of More2life, said it was “encouraging” to see “greater numbers of later life customers are being made aware of the full range of options to them, beyond the traditional mortgage”.
“We have only scratched the surface of how big this market can, and should, be. Our own data has shown a growth in the number of advisers considering affordability when working with later life clients, which is resulting in borrowers benefiting from solutions that meet their personal needs and circumstances.
“Providers across the later life space have innovated, such as through the development of a suite of products that reward customers for making payments, and we are seeing that work bearing fruit,” he said.
Harris said there is still “work to be done” in “ensuring that all advisers understand how the new breed of interest reward products can deliver a better outcome for their clients, particularly in a higher rate environment”.
Phil Quinn, head of sales at Standard Life Home Finance, said the rise in the average lump sum has taken it back to levels last seen before the mini Budget, which is a good indication of returning market confidence.
“However, it also highlights the increased costs that people are facing in later life, given the significant growth in the cost of living in that time, which is necessitating larger releases.
“The turbulence in markets has meant that some providers have pulled back, particularly when it comes to the maximum loan to values (LTVs) available. But this is changing; we recently launched two new higher LTV products on our Horizon, for example, opening up greater options for larger releases. That these products include interest reward functionality means borrowers are better positioned for managing the eventual costs of these solutions, leaving them in a far stronger position,” he noted.
