Annual equity release lending looks set to break the £2 billion barrier for the first time after growing by more than a quarter in the last year to reach a record high, new figures show.
According to the Equity Release Council, equity release lending grew by 26% over the past year to a new record high of £571.6 million in the third quarter.
This leaves annual lending for 2016 on course to break through the £2 billion mark for the first time after hitting £1.48 billion in the first nine months of the year.
The number of equity release plans taken out from July to September grew by 11% to 7,414, up 23% year-on-year.
Lump sum lifetime mortgages also proved popular with market share increasing from 33% of new plans in the second quarter to 37%.
A total of 2,773 new plans were agreed, an increase of 26% from the previous quarter and the highest number since 2008.
The total value of lump sum lending rose by 26% from £208.8 million to £264.1 million in the third quarter. This was up by 44% year-on-year and the largest amount for more than a decade.
Drawdown lifetime mortgages remained the most popular form of equity release, accounting for 62% of new plans.
The 4,632 new drawdown plans taken out in the third quarter was the highest number seen since this type of product appeared on the market. This is also an increase of 4% from the previous quarter and 21% year on year.
Nigel Waterson, chairman of the Equity Release Council, said: “Product innovation has played a huge role in the growing appeal of equity release to a range of customers, including the growing number of homeowners with interest-only mortgages due for repayment.
“Increased competition and new entrants to the market have helped to lower the costs of equity release dramatically in recent years, making it even more attractive to customers.”
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.
Jeff Bromage from Saga Money said: “The figures show that people are increasingly seeing the equity they have built up in their home as a key part of their funding for retirement. For many this is a lifestyle decision, they want to remain in their family home and continue living the way they are used to.
“We have seen the average amount people are releasing increase by 10% this year. Paying off the mortgage remains the main reason people are releasing equity, accounting for 27% of the value of funds released, the second most popular reason for releasing equity is to spend on home improvements, accounting for 20% of funds released.”
