£11 million is being released in property wealth every day in the UK

Home owners in the UK aged 55 and over are releasing the equivalent of £11 million every day from their homes, according to the latest quarterly lending figures from the Equity Release Council.

Total equity released reaches £1.02 billion in the third quarter of 2018, up 24% or £195 million since the same period in 2017. And owners are not splashing out with the figures also showing that average plan sizes are consistent with a modest approach to using property wealth.

It means that over £1 billion of property wealth was unlocked for the first time in any quarterly period and the milestone comes just weeks after the Government backed a recommendation by the Housing, Communities and Local Government Select Committee that equity release should feature among the home finance options that will be signposted to older people by the new Single Financial Guidance Body, to help support a more rounded approach to later life financial planning.

An unprecedented 12,016 new equity release plans were agreed from July to September 2018, equating to 6% more new customers than in in the second quarter of 2018 and nearly double the amount seen in the same period three years ago.

The average amount of property wealth unlocked by new customers has remained broadly consistent, showing people are withdrawing equity in modest amounts. The average new lump sum lifetime mortgage plan was 5% lower than in the second quarter of 2018, decreasing from £95,991 to £91,398, while the average first instalment from a drawdown plan saw a marginal quarterly increase of 3% from £63,584 to £65,343.

Drawdown products remain the most common choice among new customers, with 63% or 7,547 choosing this type of plan over lump sum products, which were chosen by 37% or 4,466. Home reversion plans make up less than 1% of the overall market for new plans agreed.

‘The equity release market is making an increasingly important contribution to the later life landscape on an individual, social and economic level. Older home owners are discovering in growing numbers that property wealth can play a key role in funding a myriad of needs, from making home improvements and adaptations to paying for social care and giving financial help to younger family,’ said David Burrowes, chairman of the Equity Release Council.

‘Government, regulators and industry must continue to seek ways to help people take a more rounded approach to later life financial planning. No one solution suits every individual need, and there is no doubt more people can benefit from considering property wealth alongside pensions, savings and other assets when making financial decisions – both for themselves and for those around them,’ he explained.

‘As the range of later life products continues to grow, it is vital we encourage customers to consider all available options, and ensure they can access appropriate guidance and specialist advice to weigh up the benefits, costs, flexibilities and protections to best meet their current and future needs,’ he added.

Older home owners are clearly continuing to realise the powerful and positive role their property wealth can play in later life, according to Steve Ellis, chief executive officer of Legal & General Home Finance.

‘We see a bright future ahead for lifetime mortgages and we remain committed to working with the regulator to grow this market in a safe and sustainable manner with a prudent approach to lending. The next step in the evolution of this market is to ensure the message about using housing equity in retirement is getting out to home owners across the country,’ he said.

‘For that to happen we need more advisers to enter the lifetime mortgage market, from mortgage brokers to wealth managers, to truly support their clients from their first home to showing them how they can make their property wealth work for a better retirement,’ he added.

Steve Wilkie, managing director of lifetime mortgage experts Responsible Life, people are becoming more aware of how their property can not only be a place to live, but can fund their lifestyles and ensure children and grandchildren can get onto the property ladder themselves.

But he believes that more needs to be done to inform them about the facts of equity release. ‘It is vital the Government does follow through on recommendations to signpost equity release to ensure people are given all the options before they make big decisions on their financial futures,’ he said.

‘Whilst there has been strong growth, there still remains a lack of general awareness of how the products work. If a potential customer is to decide against it as a retirement planning option, they should do so knowing the facts rather than myths,’ he pointed out.

‘People must be equipped with all the retirement planning options, including the features, benefits and risks to ensure they make the best decisions for their futures. Further innovation with new products and technology is crucial to ensure the sector will not only continue to grow, but thrive,’ he concluded.