Equity release in UK reached new records in 2016

Equity release lending in the UK broke the £2 billion barrier for the first time in 2016, marking a landmark year for the sector, new figures show.

Overall lending reached £2.15 billion for the year, an increase of 34% on 2015 with an additional £542 million of lending activity amounting to double the rate of growth from 2014 to 2015.

The figures from the Equity Release Council also shows that sector also finished the year on a record quarterly high as lending increased 51% to £670 million year on year across the last three months of 2016, from £445 million in the fourth quarter of 2015.

From October to December 2016 some 8,303 new equity release plans were taken out, an increase of 12% from the previous quarter and up 30% year on year. The final quarter of 2016 also marked the first time since the fourth quarter of 2006 that the number of new plans exceeded 8,000 in any single quarter. Overall new plans across 2016 stood at 27,563, the highest amount since 2008.

Lump sum lifetime mortgages proved popular in 2016, with the number of new plans agreed increasing by 26% year on year. This increase outstripped the rate of growth in drawdown products, which rose 19% by volume over the same period.

Drawdown products remain the most popular: the total number of new drawdown plans was 17,882 for the year, accounting for 65% of the market. However, the appeal of lump sum products saw them record their largest share by volume of new plans agreed since 2010 at 35%. The report says this is likely to be influenced by the use of housing wealth to repay mortgage debt as well as meeting other financial needs.

‘2016 has proven to be a historic year for the equity release sector. Passing the £2 billion mark for the first time indicates that housing wealth is becoming an increasingly important focus of retirement planning,’ said Nigel Waterson, chairman of the Equity Release Council.

‘The market continues to become ever more competitive with growing choice and falling rates for customers a welcome consequence of moves by new and existing providers. It is vital that we now build on this momentum to ensure more people can access the necessary information and advice to make informed choices about how best to use their various assets in later life,’ he explained.

‘With increased recognition of the role housing wealth can play, we look forward to working closely alongside government, regulators and industry to help support the UK’s ageing population,’ he added.

According to Alice Watson, head of marketing at Retirement Advantage Equity Release, the growth of equity release seem to fit with the way people are now planning for retirement. ‘The holistic approach to thinking about finances where all pots of wealth, including property, are taken into account is becoming the new normal,’ she said.

‘As more and more over-55s recognise the value in using property wealth to help in retirement, the equity release industry is listening and responding with a wave of product innovation,’ she added.

Retirement Advantage’s own figures show that 57% of its customers took out an equity release product in 2016 to clear an existing mortgage, and 50% did so to make home improvements. Beyond that, though, 16% used the loan to fund a holiday and a further 16% actually extracted equity from their property to buy a new property.

‘The challenge for the equity release industry in 2017 is to stay abreast of customer requirements and to respond accordingly. To build on the momentum from 2016, it is vital that providers and advisers work together to build awareness of the products on offer and how they can fit in planning for retirement,’ Watson concluded.