Equity release lending experienced a record-breaking second quarter as more and more people look to unlock housing wealth for their retirement.
According to new figures from the Equity Release Council, over-55s withdrew a total of £701 million from their homes between April and June – the highest quarterly figure since records began.
Lending is up by more than a third from the second quarter last year at 36%.
There were 16,000 equity release customers between April and June. Over half (8,454) took out new equity release plans, 27% higher than the second quarter last year.
Drawdown products remain the most popular in the market, with almost seven in 10 (68%) new customers going for this option.
Equity release gives you access to the wealth tied up in your property without having to sell or move home. It is designed for older homeowners who own their property outright or have relatively small mortgages to pay.
You can borrow against the value of your home, sell it or part-exchange it for a lump sum or a regular monthly income.
A lifetime mortgage is a long-term loan which you can use to extract your funds in a single lump sum or in smaller amounts over time through what is known as drawdown. Home reversion plans allow you to access all or part of the value of your property while retaining the right to remain in it rent free.
Nigel Waterson, chairman of the Equity Release Council, said: “Continued rapid growth in housing wealth withdrawals reflects an increasing appetite among older consumers to utilise bricks and mortar for funding retirements.
“The retirement income pressures facing many savers in the era of defined contribution pensions and low interest rates are encouraging homeowners to consider a wider range of financial options. Housing wealth – often people’s most valuable asset – is an important part of bridging the gap between the comfortable retirement people want and the retirement they can afford from their savings.
“It is vital we build on recent work by regulators and industry to encourage more joined-up thinking between related areas of financial services, so that consumers have the best support for their transition into later life.”
Dean Mirfin, technical director at Key Retirement, said: “The equity release market is on course to pass £3 billion this year as lenders increasingly respond to growing customer demand for new solutions to a wide range of financial issues in retirement.
“The expansion is impressive but it should be even higher were lenders doing more to signpost equity release to their interest only maturities. There are an estimated 10,000 borrowers this year alone who have either a shortfall or no way to repay their loan and a significant number are going to have a problem. Most of the interest-only customers approaching us are finding us themselves.
“Some lenders are on board with offering wider solutions including equity release but this is still in the minority, and we hope more lenders start to do more.
“The continued strong growth in the equity release sector shows that, at pace, it is becoming an ever increasing element of retirement planning. The amounts of property wealth being released means that customers can afford to help themselves and families while also sorting out issues such as interest-only mortgage repayments and debts.”
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