Equity release lending totalled £3.6bn in 2018, in what Key chief executive Will Hale described as a “landmark year for the market”.
According to Key data, the £3.6bn represented a 19% increase from £3.01bn last year, while the number of plans increased by 21% to over 47,000.
That figure did not include drawdowns and further advances, which would take the total close to £4bn.
Hale said: “The growth in gifting highlights the intergenerational benefits of equity release for families with money being used to clear debts, fund university fees and pay for house deposits and weddings.
“Even the use of equity release to fund home and garden improvements has benefits for families as it helps people to ‘age-proof’ their home and preserve wealth for the family.
“Debt remains however a major issue for some retired people and substantial numbers are relying on equity release to clear credit cards and loans as well as paying off mortgages.
“Good specialist advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”
Key also made predictions about the market size this year. The later life broker said new lending will likely exceed £4bn in 2019, though Hale called this a conservative estimate. Meanwhile with drawdowns and further advances taken into account total new lending is likely to be above £4.5bn.
In 2018 the number of borrowers between the age of 55 and 69 taking out an equity release mortgage accounted for 42% of plans, up from 36% the year before.
While the Financial Conduct Authority said it was concerned that there were more lifetime mortgage borrowers aged between 56 and 60 in June last year, the 55-59 age bracket only accounted for 5% of new plans.
The number of couples taking out equity release proportionally fell from 66% in 2017 to 62% in 2018, the first time that sector has seen a fall.
Currently only 28% of equity release products taken out are ‘enhanced’, where lending criteria is based on personal health records. If everyone that qualified took out an enhanced deal that would make up around half of new plans. However based on the current crop of products available it’s only predominantly useful for those looking to withdraw as much equity as possible from their property.
More than a quarter (27%) of equity release customers gifted money in 2018. The cash was typically used to clear debts, for life events like weddings, for a house deposit, for university or school fees, or simply for day-to-day living.
Key expects the use of equity release for these purposes to become more common in future.
The broker said the growth of the ‘3 year rule’ policy for care or death from providers has been a significant innovation. This means that for couples sharing a property if one of them dies the other can repay the loan penalty free – if they wanted to downsize or simply move somewhere else.
Dave Harris, chief executive at more 2 life, said: “Today’s record-breaking figures from Key once again demonstrate the consumer appetite for equity release.
“Almost hitting the £4bn mark is a huge achievement for the market and one that was inconceivable just a few years ago.
“Equity release is a highly flexible and versatile retirement planning tool being used by an increasing number of specialist advisers. We see people not only helping their families but also making their retirement finances more secure, and while the repayment of debt (31%) remains a priority, increasingly customers are passing their wealth onto their relatives (27%).
“This intergenerational wealth transfer is becoming an important underlying factor driving growth in the later life market – and a vital helping hand for the younger generation.
“As the equity release market looks to build upon last year’s fantastic results, innovation and funding will be key in ensuring we are able to sustain this type and rate of growth.”
And David Burrowes, chairman of the Equity Release Council, added: “The modern-day equity release market is serving a vital social purpose, by helping thousands of older homeowners and their families to use property wealth to support their financial goals.
“Consistent growth in recent years has been driven by increased product flexibilities and innovation to meet a variety of consumer needs. Intergenerational support remains a key usage, which highlights the important role that equity release now plays in the later life landscape on both an individual, family and societal level.
“Today’s market is built on a combination of increasing choice and robust consumer safeguards.
“Looking ahead, it is important that this is maintained as the range of later life products continues to grow. It is vital we encourage customers to consider all available options in terms of their wealth and assets to get the best outcomes from a rounded approach to retirement planning.”