Equity release has become the fastest growing segment of the mortgage market in terms of customer numbers.
According to new figures from the Equity Release Council, the volume of lifetime mortgage customers grew by 22% in 2016, with a total of 27,534 new plans agreed.
The second fastest growing mortgage segment – buy-to-let remortgaging – saw an increase of 16%, having recorded the biggest annual growth rate in the previous three years.
Other segments of the mortgage market had a mixed year in 2016. While remortgaging numbers grew 14% and first-time buyer numbers by 8%, the volume of home mover mortgages fell by 2% while buy-to-let purchase mortgages fell 13% from 2015.
The second half of 2016 saw a record £1.24 billion of housing wealth unlocked – the majority via lifetime mortgages – taking total lending for the year up to £2.15 billion.
The growth rate of lending between 2015 and 2016 was 34%, more than double the 16% seen from 2014 to 2015.
Growing appetite for unlocking housing wealth in later life is also apparent in the changing balance between the number of customers taking out lifetime mortgages and those taking out other mortgage products.
In 2006, there was one new lifetime mortgage agreed for every 27 home mover mortgages and 43 remortgages. By 2016 this had reduced to one lifetime mortgage every 13 home movers and 14 remortgages respectively.
Nigel Waterson, chairman of The Equity Release Council, said: “2016 was a hugely significant year for the equity release sector. The value of lending has nearly tripled in the five years from 2011 to surpass the £2bn mark, and we also celebrated the 25th anniversary of the industry Standards which have been fundamental to establishing a safe and reliable market for consumers.
“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.”
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% opting for lump sum mortgages.
A small number took out home reversion plans. However, over the course of the year the proportion of lump sum customers increased slightly, from 33% in H1 to 37% in H2 (drawdown fell from 67% to 63% as a result).
