Lifetime mortgages are the now fastest growing area of the market, an Equity Release Council report has revealed.
There were 22% more lifetime mortgage customers in 2016 with 27,534 of total new plans.
The second fastest growing mortgage segment was buy-to-let remortgaging with an increase of 16%.
Nigel Waterson, chairman of The Equity Release Council, said: “The sector is becoming increasingly mainstream amid growing appetite from older homeowners, reflected by the fact that lifetime products were the fastest growing segment of the mortgage market last year.
“Older homeowners are increasingly realising that there are a number of potential uses for their housing wealth beyond supplementing their retirement income, including re-investing in their homes and helping younger family members by providing a living inheritance.
“Greater flexibilities and growing competition mean the equity release product range continues to evolve, and the council and its growing membership remain steadfastly committed to ensuring best practice in advice and product delivery to ensure good outcomes for consumers.”
The average equity release rate has fallen by 0.51% between July 2016 and January 2017 to 5.45%, while some providers are offering rates below 5%.
Drawdown mortgage products continued to be the most popular type of equity release plan in 2016, with 65% of new customers opting for drawdown compared to 35% going for lump sum mortgages.
Over the course of the year the proportion of lump sum customers increased slightly, from 33% in H1 to 37% in H2, with drawdown falling from 67% to 63% as a result.
Steve Ellis, managing director of Legal & General Home Finance, said: “To be the fastest growing segment of the mortgage market in a time of low interest rates and a surge in remortgaging is testament to the growing popularity of lifetime mortgages.
“Whilst the sector should rightly be proud of this success, more needs to be done to bring lifetime mortgages into the mainstream.
“The concept of releasing equity from your home to secure a better retirement should no longer be considered a niche solution of last resort, but a specialist retirement option that can help consumers to improve their financial outcomes.”
He added: “There are many advisers that hold the equity release qualification, but do not currently advise on lifetime mortgages. We would like to see these intermediaries join this growing market and help bring retirement lending solutions to even more customers this year.
“Equity release lenders also need to continue to work with regulators and trade bodies to develop new products that meet the individual needs of consumers.
“A £2.15bn lifetime mortgage market is strong growth but we are still just a small fraction of the wider £246bn mortgage industry. We can, and should, continue to see growing the retirement lending market as a priority for financial services in the UK.”
Other segments of the mortgage market had a mixed 2016.
Volumes grew by 14% for remortgagors and 8% for first-time buyers. However they fell by 2% for homemovers and 13% for buy-to-let purchases.