ER lending in Q2 reached the highest level since records began in 2002 – surpassing the previous high of £375.4m in Q3 2014. The number of equity release customers increased by 11% to 5,400 in Q2 from the previous quarter.
The industry has profited from growing property values, pensions freedoms, the Mortgage Market Review preventing older people from accessing a regular mortgage and higher maximum loan-to-values.
Nigel Waterson, chairman of the Equity Release Council, said: “The last three months have been a landmark period for UK retirees and those approaching retirement, and equity release activity continues to grow amid a sea of change. There is no doubt the pension freedoms have created more options for people to consider, but the appeal of tapping into housing wealth is on the rise as older consumers seek to make use of all the assets at their disposal.
“With the mainstream mortgage market grappling with issues of so-called age discrimination in the wake of the Mortgage Market Review, it is time to build bridges and encourage more focus on equity release as a source of finance in retirement. New providers promise to bring more innovation to the equity release arena this year and will help to satisfy the rising demand.”
In H1 2015 more than 10,000 customers took out equity release, with the value of the plans topping £710m.
Sales on drawdown products are growing at the fastest rate year-on-year, although lump sum lifetime mortgage lending also hit an 8-year high in H1.
Alex Edmans, head of retirement at Saga, said: “The Mortgage Market Review has stopped many older people from accessing a traditional mortgage, this and the fact that many people are now coming to the end of their interest only mortgage term without a full repayment plan, has meant that more are turning to equity release as a viable solution to borrowing in retirement. Indeed Saga has seen an increase in the use of equity release to clear a mortgage.
“Now is a good time to consider equity release, as interest rates are at their lowest ever levels, property prices are increasing and loan-to-values have recently increased, meaning people are able to access more of the wealth tied up in their property.”
Dean Mirfin, technical director, Key Retirement, predicted final year-on-year growth to be in the region of 25%.
He added: “The increasing average loan amount reflects the fact that pensioner property values continue to grow, whilst the average loan to value remains stable showing borrowers in the main remain sensible by not stretching their LTV to the maximums available.”