New figures released by the Equity Release Council (ERC) have revealed that the number of equity release plans taken out by homeowners aged 55+ soared by a striking 8% in Q3 2022.
13,452 new plans were taken out between July and September 2022 by over-55s, with a total of 25,519 plans active during Q3. This culminates in a 34% year-on-year rise, with total lending to new and returning customers up 49%.
Total lending also soared to a record £1.71 billion, with the average new lump sum plan size sitting at £133,770, up 1% from Q2.
However, the average new drawdown plan fell 3% to £88,340 for the initial withdrawal. Activity also fell 10% in September as the tough economic conditions began to take hold.
“The summer months have seen the equity release market resume its pre-pandemic growth trajectory, with extra protections having been added in the intervening years so all new customers can make voluntary repayments when they can afford to and reduce their overall cost,” said David Burrowes, chair of the Equity Release Council, continuing:
“Equity release is not an overnight purchase, and the desire to secure lower interest rates before anticipated rises is likely to have influenced customers’ timings as they completed deals from earlier in the year.
While recent turbulence in financial markets have added to upward pressure on interest rates, product flexibilities and stringent safeguards mean modern equity release remains the most secure and adaptable way to access the money tied up in your home without giving up ownership or risking repossession through fixed repayment commitments.
With the value of UK homes having passed £7 trillion, people are increasingly inclined to put their property wealth to work in later life to support themselves and family in the here-and-now.
Council standards mean there are measures in place to protect customers’ existing loans from rising interest rates, as well as ensuring that people can only take out equity release once they have considered it from every angle through detailed financial and legal advice.”
Craig Brown, CEO of Legal & General Home Finance, said:
“Demand for equity release has returned to pre-pandemic levels, as the nation looks to the value of their homes to support strategic later life planning needs. Although there may be a slowdown in house price growth, property prices are still at an all-time high and many homeowners have built up a significant amount of equity in their homes and see their home as a retirement asset.”
Brown continued:
“As we look to the next three months, we expect that gifting will remain a popular use of equity release. We could also see customers looking to access property wealth to finance energy efficiency improvements to make homes more sustainable for the long term. As ever though, it is not a quick fix, but an important product to be considered as part of a wider approach to retirement planning.”
Simon Gray, managing director at equity release advisory firm HUB Financial Solutions, added:
“This is another positive quarterly report demonstrating the ongoing recovery from the pandemic disruption. After a busy Q2, it is clear customer demand to access some of the value tied up in property continues to be strong despite the backdrop of rising interest rates.”
