The Equity Release Council’s (ERC’s) lending figures for the period showed that compared to the previous quarter, lending was down by 4%.
This drop was attributed to a decline in lending across the whole residential mortgage market due to economic uncertainty, stamp duty changes and a later Easter.
The equity release market served 14,404 new and returning borrowers in Q2, relatively flat on the 14,350 customers served in the preceding quarter.
The ERC said activity was driven by new lump sum borrowers accessing £126,422 on average. This was 14% more than they borrowed during the same period last year and just 1% down on Q1.
The number of new plans taken out during the period was flat on the last quarter and 2% higher than the previous year, totalling 5,319.
Some 56% of new borrowers opted for a drawdown, and the average new initial drawdown accessed in Q2 was £65,856. This was 6% lower than in Q1 and 1% up on the year before.
The average new drawdown reserve facility was £53,338, 13% down quarter-on-quarter and 16% up on the same period in 2024.
Returning equity release borrowers
Some 7,640 returning borrowers accessed a drawdown, 1% lower than Q1 and 5% down on last year. They borrowed loans of £13,150 on average, 5% less than the previous quarter and 4% more than in 2024.
There was a 9% quarterly rise in borrowers taking out a further advance, totalling 1,445, and compared to last year, this represented a 40% jump.
The ERC said the proportion of borrowers taking a further advance was very low, accounting for less than 7% of the total amount lent.
The average lump sum further advance borrowed was £30,180, the average drawdown initial further advance was £27,303, and the average drawdown further advance reserve facility was £6,545.
More products on the market
The ERC data showed that there were 1,669 plans available at the end of Q1, higher than the 907 products in Q1. The organisation said this reflected a desire from lenders to offer a range of products tailored to borrower needs. Some 50% of equity release plans offered dynamic pricing, with the final annual percentage rate (APR) based on the features a borrower chose.
The average rates of new products launched in Q2 were 7.24% APR, higher than last year’s 6.64%. The ERC put this down to rising gilt rates.
David Burrowes, chair of the Equity Release Council, said the figures showed a resilient market despite economic headwinds.
He added: “Growth [that] continues to be driven by new borrowers accessing greater amounts of housing equity to manage debt, boost income and support their wider families.
“While the equity release market faces some of the same challenges seen in the residential mortgage market, new lump sum and drawdown loans are up as customers take advantage of stable long-term house price growth to support their later life finances. An approach [that] is only likely to grow in the future, with Fairer Finance predicting that by 2040, over half of UK households (51%) are expected to require housing wealth to support their spending needs in later life and retirement.”
Burrowes added: “The later life lending market will inevitably grow as more customers look to their housing wealth to boost retirement income and meet care needs. We need to be ready and resilient to build upon strong advice standards, product innovation and a commitment to support a wider range of customers as this provides significant opportunities for the market.
“We look forward to making the most of the opportunity presented by the recently launched Financial Conduct Authority (FCA) discussion paper into the ‘Future of the Mortgage Market’, which recognises the significant role of housing wealth in paying for retirement and that flexible lifetime mortgage products for older consumers are becoming ‘increasingly mainstream’.”
Equity release as a mainstream option
Lorna Shah, managing director of retail retirement at L&G, said: “These figures suggest equity release is being seen as a more mainstream product for people looking to achieve their later life goals. L&G data found that home improvements remain the most popular use, while fewer customers are using it to pay off debts.
“As a lender, we work closely with advisers and the broader industry to ensure customers make informed choices based on their personal circumstances. While not suitable for everyone, it’s important to have a holistic conversation around financial planning in retirement, considering property wealth amongst other assets and investments.”
Will Hale, CEO of Key Advice and Air, said the figures suggested the market was returning to growth and the rise in average case sizes indicated that more affluent customers were recognising the benefits of accessing housing wealth in later life.
Paul Carter, CEO of Pure Retirement, echoed this, saying it reflected what the lender was seeing as 12% of its new customers owned properties worth at least £700,000.
Carter said this showed the “diverse range of needs the sector continues to meet, and all the signs remain pointed towards ongoing and sustainable market growth from a customer-centric sector that continues to become a more mainstream proposition”.
However, Hale added: “The lack of growth in customer numbers remains a concern and highlights that many who would potentially benefit from modern lifetime mortgage options are simply not accessing them.
“The sector must engage with the recent FCA discussion paper, which looks to explore how later life lending can move from a niche to a norm in order to support people’s finances in retirement and boost the economy.
“In the meantime, we urge all advisers to ensure that all options are considered for over-50s customers with referrals to trusted specialists in place to support good outcomes for all needs and circumstances.”
