Record amounts of property wealth were accessed via equity release products in Q4 and across 2021 by more than 76,000 new and returning customers, according to the Equity Release Council.
Figures show that the sector has not only maintained its resilience throughout the uncertainty of the pandemic but has now returned to growth for the first time since 2018.
Total lending to homeowners aged 55+ via lifetime mortgages and home reversion plans grew by 24% year-on-year, compared with 31% lending growth across the wider mortgage market.
Average loan sizes also increased, partly influenced by rising property prices and an increase in wealthier customers using equity release as part of their financial planning.
David Burrowes, Chairman of the Equity Release Council, commented:
“Cost of living pressures are just one of many reasons why homeowners are choosing to cash in on years of wealth accumulated in their homes. Increasing loan sizes partly reflect the rise in house prices and a more affluent type of customer using lifetime mortgages to plan their finances or gift a living legacy to family members.
Having proved itself to have solid foundations through a period of uncertainty, the equity release market’s return to growth has just as much to do with trust and innovation as it does with external factors as households look to manage their finances in later life.
Equity release products have continued to evolve in recent years with new providers and features adding to their appeal. Increasingly flexibility has brought lifetime mortgages closer to their residential equivalents, by offering capital or interest payment options alongside long-term, time-honoured protections against rising interest rates and negative equity.”
Figures show that in 2021, 76,154 customers took out new equity release plans, made use of drawdown reserves or agreed extensions to existing plans. This was a 4% increase year-on-year from 72,988, although it remains below the peak of 85,497 seen in 2019.
Total lending reached £4.8bn for 2021, including £4.3bn via new plans and £500m to returning customers. This represents a 24% rise from £3.86bn in 2020 at a time when wider lending across the mortgage market grew 31%.
Annual equity release lending surpassed the previous record set in 2018 (£3.94bn), influenced by factors including growing choice and competition in the market, customers seeking additional sources of funds for later life, and the strong performance of the UK housing market with the average house price increasing by £25,000 in the year to November 2021.
Overall, 2021 saw 40,964 new plans agreed, an increase of 2% from 40,337 in 2020 despite remaining below the levels recorded in 2018 (46,397) and 2019 (44,870).
Lump sum lifetime mortgages made up 43% of new plans agreed across the whole of 2021, matching the figure recorded in 2020 which was the largest annual share of market activity since 2009 (44%). This may be influenced by customers with existing residential mortgages, including interest-only loans, reaching maturity in later life.
For the full year, 4,669 customers agreed extensions to their existing plans, which may reflect the fact that rising house prices have given some homeowners more equity to draw on.
Claire Singleton, CEO of Legal & General Home Finance, said:
“The equity release market’s growth is exceeding expectations, with record amounts of property wealth accessed in the last quarter of 2021. This is partly due to the ongoing housing boom, which has led many homeowners to reconsider the role property wealth plays in their lives.
The range and flexibility of later life lending products available means their appeal is growing for a variety of customer needs – they can provide a source of income and stability or, as pandemic restrictions ease, help fund more aspirational spending, like holidays and family celebrations.
We’re now at a point where the equity release market has returned to growth for the first time since 2018 and anticipate this growth will only continue as equity release becomes a more standard consideration amongst other at-retirement products.”
