The amount of equity release lending reached an all-time high of £1.38 billion in 2014, figures from the Equity Release Council have revealed.
In just one year the market grew by 29 per cent as the appeal of equity release among older homeowners over the age of 55 grew.
Last year saw 21,336 new customers – the most recorded since 2008 – and a 13 per cent increase from 2013. Customer numbers have now grown for four consecutive years.
The average amount an equity release borrower took out in 2014 was £64,787, another record and a 14 per cent rise from the year before. This exceeds the previous record of £60,504 in 1998 by 7 per cent.
Products
Two-thirds of new equity release customers (66 per cent) chose drawdown products in 2014, in contrast to just 25 per cent of customers in 2006. These products allow retirees to take smaller sums as and when required, often allowing more of their housing wealth to be preserved.
Lump sum products, where borrowers draw down one sum of money, now account for 34 per cent of new plans while home reversion account for less than 1 per cent. Home reversion is where the provider buys all or part of your property but you can live there for the rest of your life.
Comment
Nigel Waterson, chairman of the Equity Release Council commented: “Many retirees have more wealth tied up in property than anywhere else, so it is only logical that this forms part of their plan to enjoy a comfortable retirement.
“The new pension freedoms won’t change the fact that many people do not have enough savings for later life. There is a danger that people’s pension pots will be ‘here today, gone tomorrow’ – but housing wealth is the one constant that many in this generation can rely on for support.
Geoff Charles, CEO of equity release adviser firm Bower Retirement Services, said: “Gone are the days when equity release was perceived as the black sheep of retirement finance. Now, this growing sector is becoming far more mainstream – as customers learn the benefits of releasing some of their housing wealth.”
Alice Watson, marketing manager, Stonehaven, commented: “The average retiree is sitting on housing equity of around £200,000, so it’s no surprise that using a lifetime mortgage is fast becoming an important part of retirement planning.
“Inflated property prices and low interest rates mean that older homeowners find themselves asset rich but cash poor and are starting to realise the benefits and freedom of unlocking the capital in their homes.”
