Equity release lending increased by 28% in the first half of 2016 year-on-year to experience its steepest growth in a decade.
Lending reached £908m in H1 2016 after rising ty £198m from £710m in H1 2015.
The number of equity release products has grown by 34% year-on-year and now stands at double the level of three years ago.
Nigel Waterson, chairman of The Equity Release Council, said: “Growth is being driven by a combination of rising consumer demand and continuing signs of innovation and change in the market.
“In terms of demand, savings shortfalls and other financial challenges leave many over-55s looking for an extra source of income in later life, while housing wealth also offers a vehicle for intergenerational transfer of wealth and inheritance planning.
“The industry response so far this year has already seen new providers, partnerships and new potential emerge, with closer relationships being built with related areas of financial services including residential mortgages and later life financial planning.”
Legal & General launched its first equity release products in June last year after purchasing lifetime mortgage provider Newlife in April 2015.
Meanwhile in May Nationwide was reported to be entering the market with a ‘safer’ range of products.
The equity release industry’s prospects look good, as lending activity has been on average 13% higher in the second half of the year than the first half since 2007.
Dean Mirfin, technical director at Key Retirement.com, said: “The 10-year high for equity release market growth highlights how the combination of record low rates for plans and house price growth is making the case for how property wealth is increasingly supporting retirement planning.
“Retired homeowners have more than £1 trillion property wealth owned outright with the over-65s seeing strong growth from their investment in their house so it makes perfect sense to capitalise on those tax-free to enhance their retirement standard of living.
“The cuts in equity release rates in the past year alone mean homeowners releasing the average £76,300 now compared to a year ago would save around £30,000 in interest over 15 years rising to nearly £50,000 over 20 years.”
The average value of equity release customers’ homes has risen by 8.1% in the last year from £283,806 to £306,854.
Andrea Rozario, chief corporate officer at Bower Retirement, said: “Increased competition and innovation in the equity release market is helping drive growth to a 10-year high and the responsibility now is for the industry to ensure more customers become aware of the option of using property wealth to support retirement planning.
“It is striking that around half of new plans being sold enable customers to make voluntary repayments highlighting how the market is shifting to more retirement lending.
“The market has been evolving, improving and becoming more cost-effective than ever before underlining the need for expert independent advice for consumers and the benefits for advisers in working in the sector.”
Alice Watson, head of marketing at Retirement Advantage Equity Release, added: “These figures reinforce the fact that the equity release industry is in rude health. The big question now is whether lending will break the £2bn mark by the end of the year. Will Brexit be a factor? When you consider that house prices have remained pretty steady thus far, it would take something dramatic for the industry to fall short of that milestone.
“For ever more over-55s, equity release just makes sense. Property prices remain high, savings accounts continue to return precious little, and when you combine this with the holistic approach to retirement planning that is rapidly becoming the norm, unlocking some of the value held in property is a viable and credible solution.
“The industry can’t rest on its laurels, though. We’ve come this far through product innovation, driven by a desire to make equity release as useful for the end customer as possible, and that has to be the mantra for the months and years ahead. New entrants to the market also boost competition, which also spurs greater product innovation.”