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Home owners in UK continued to be drawn to equity release as numbers soar

The number of new equity release plans from home owners in the UK increased by 34% in the third quarter of 2017 as lending passed £800 million in a single quarter for first time.

The latest figures from the Equity Release Council also show that the value of these plans increased by 44% year on year as growing numbers of home owners look to housing wealth as a core pillar of financial planning for retirement.

The data also reveals that in total the sector saw activity from almost 18,000 new or returning customers during the quarter and demand for drawdown products continues to rise, accounting for over three quarters of all new products taken out.

Over 55s withdrew a total of £824 million of property wealth from their homes via equity release plans with a total of 17,982 customers between July and September, up by 12% from the second quarter.

Of these 9,905 were new customers, 6,849 were returning drawdown customers releasing housing wealth in instalments and 1,138 further advance customers agreeing extensions to existing plans.

The growing range of products on the market and increasing consumer appetite to use housing wealth as a source of retirement finance mean that third quarter lending activity has now risen by 82% in the last two years, up from £453 million in the same period of 2015. New customer numbers have risen 64% over the same period from 6,049 in 2015.

The report says there has been a further shift towards offering more breadth across drawdown lifetime mortgages to reflect consumer demand and this has meant the proportion of new customers choosing this option over lump sum lifetime mortgages or home reversion plans in the third quarter rose by 9% to 77% from the previous quarter and was up 15% year on year.

Drawdown products typically see customers releasing smaller amounts of equity to begin with at £64,793 in the third quarter compared to £100,389 via lump sum plans, therefore reducing the build-up of interest over the duration of the plan. It also provides customers with the flexibility to unlock further sums via future instalments as and when they need to.

‘The sustained growth in housing wealth withdrawals is indicative of a wider shift in the way consumers are approaching their retirement planning, by taking a broader range of financial options into consideration,’ said Nigel Waterson, chairman of the Equity Release Council.

‘Property is, for many people, their largest asset and has the potential to play an increasingly important role in the future of retirement funding. The combination of rigorous safeguards and flexible products in today’s market is one reason why housing wealth is now being used to support a wide range of financial goals. These range from boosting pension income and supporting retirement lifestyles to funding home improvements and adaptations, consolidating debts and providing a living inheritance to younger generations,’ he explained.

‘As more home owners look to housing wealth as a source of retirement finance, The Council and its members will continue to ensure the highest standards of customer protection are in place alongside the continuing innovation that has seen the available product range triple since 2007,’ he added.

The continued increase in the popularity of equity release is further proof that people are adopting a holistic approach to retirement planning, according to Alice Watson, head of marketing at Retirement Advantage Equity Release.

‘We know that for many over 55s their property wealth is greater than their pension savings, and equity release can help them boost income and have a more fulfilling retirement. These figures also pay testament to the innovation the equity release market is currently witnessing,’ she said.

‘The Equity Release Council has cited the growing range of products on the market as a driver of recent growth. Pioneering products, such as the buy to let range launched by Retirement Advantage in August, will continue to expand the potential pool of property wealth that can be tapped into,’ she explained.

‘However, while these figures represent further good news, it is vital that the equity release industry does not take its foot off the gas and continues to innovate if it is to carry on growing,’ she concluded.