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Over 55s boost property equity release in UK to record high

The 2014 total was up 29% from 2013, bringing the equity release market back above pre-recession levels, the data from the Equity Release Council also shows.

It points out that home owners aged 55 and over are increasingly use their housing wealth to boost their finances and help with living costs in later life.

On a quarterly basis the value of equity release lending totalled £365.7 million in the final quarter of 2014, an increase of 18% year on year and it reached £741 million for the second half of the year.

There was also a six year high in new customer numbers with more than 5,700 over 55s releasing equity from their homes in the last three months of 2014 and there were 5,712 new customers in the final quarter of the year, the largest amount in a single quarter since the fourth quarter of 2008.

It pushed the total number of new equity release customers in 2014 to 21,336, a 13% increase from 2013 and the largest yearly figure since 2008. Customer numbers have now grown for four consecutive years since the recession.

The average value of equity release lending also hit a new milestone in 2014, reaching £64,787, up 14% from the previous year and exceeds the previous record of £60,504 in 1998 by 7%.

Some 66% of new equity release customers chose drawdown products in 2014, in contrast to just 25% of customers in 2006. Lump sum products now account for 34% of new plans while home reversion account for less than 1%.

However, drawdown products account for a smaller share of the market by value at 60% or £825 million during 2014, as these products allow retirees to take smaller sums as and when they need them, often allowing more of their housing wealth to be preserved.
 
‘These lending figures show that 2014 was truly a record breaking year for the industry. Equity release is proving to be a crucial tool for financial planning in retirement, and is allowing retirees to improve their standard of living and give them more flexibility to support themselves or family members,’ said Nigel Waterson, chairman of the Equity Release Council.

‘Many retirees have more wealth tied up in property than anywhere else, so it is only logical that this forms part of their plan to enjoy a comfortable retirement. The new pension freedoms won't change the fact that many people do not have enough savings for later life. There is a danger that people's pension pots will be here today, gone tomorrow,  but housing wealth is the one constant that many in this generation can rely on for support,’ he explained.

‘Increasing awareness of the available products and their benefits means that equity release will continue to thrive in 2015 and bring more help to our ageing population. Continued collaboration with all those in the sector, including the regulator and government, will support further innovations and maintain consumer protections. With talk of mainstream lenders and new offers arriving in the market, we anticipate big things for equity release in the year ahead,’ he added.

According to Helen Davies, head of implementation at Partnership, the latest figures shows that the equity release market, which has often been seen as a specialist one, is becoming more mainstream.

‘Two different sets of customers appear to be developing; those who use a lump sum to clear outstanding debts at the start of their retirement and those who use drawdown to boost their income. This clearly highlights the different ways that equity release can support the over 50s and strongly support the case for future market development,’ she said.

‘With the introduction of the new pension freedoms in April 2015 and more people actively discussing their retirement financing options, we expect to see the market continuing to grow and prosper into the future,’ she added.

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