Equity release lending broke the £2 billion barrier for the first time in 2016, marking a landmark year for the sector, new figures show.
According to the Equity Release Council, overall lending reached £2.15 billion for the year, an increase of 34% on 2015, with an additional £542 million of lending activity – double the rate of growth from 2014 to 2015.
From October to December 2016, 8,303 new equity release plans were taken out, an increase of 12% from the previous quarter and up 30% year-on-year.
The final quarter of 2016 also marked the first time since 2006 that the number of new plans exceeded 8,000 in any single quarter. Overall new plans across 2016 stood at 27,563 – the highest amount since 2008.
Lump sum lifetime mortgages proved popular in 2016, with the number of new plans agreed increasing by 26% year-on-year. This increase outstripped the rate of growth in drawdown products, which rose 19% by volume over the same period.
Drawdown products remain the most popular, with the total number of new plans hitting 17,882 for the year, accounting for 65% of the market.
However, the appeal of lump sum products saw them record their largest share by volume of new plans agreed (35%) since 2010, which is likely to be influenced by the use of housing wealth to repay mortgage debt as well as meeting other financial needs.
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: “2016 has proven to be a historic year for the equity release sector. Passing the £2 billion mark for the first time indicates that housing wealth is becoming an increasingly important focus of retirement planning. The market continues to become ever more competitive with growing choice and falling rates for customers a welcome consequence of moves by new and existing providers.
“It is vital that we now build on this momentum to ensure more people can access the necessary information and advice to make informed choices about how best to use their various assets in later life. With increased recognition of the role housing wealth can play, we look forward to working closely alongside government, regulators and industry to help support the UK’s ageing population.”
Alice Watson, from Retirement Advantage Equity Release, said: “This is new territory for the equity release industry. In a year which included Brexit, the most momentous event since the financial crisis, equity release hasn’t just remained resilient. It has hit record highs.
“What’s most encouraging is that the growth of equity release fits with the way people are now planning for retirement. The holistic approach to thinking about finances, where all pots of wealth – including property – are taken into account, is becoming the new normal. As more and more over-55s recognise the value in using property wealth to help in retirement, the equity release industry is listening and responding with a wave of product innovation.”
Separate data from Key Retirement revealed that seven out of 12 regions across the country saw growth in the value of property wealth released. East Anglia recorded the biggest increase at 67%, followed by a 43% rise in London, while the South East saw growth of 35% and Wales growth of 32%.
The biggest fall in property wealth being released was 29% in Northern Ireland while the North West and Yorkshire & Humberside were only slightly lower.
East Anglia also recorded the highest increase in total plan sales at 47% followed by Wales on 37%. The East Midlands saw a 29% increase in plan sales during 2016.
Regional breakdown of equity release in 2016
| Region | Number of plans sold 2016 | Number of plans sold 2015 | Total value released 2016 (£ million) | Total value released 2015 (£ million) |
| South East | 7,451 | 5,938 | £670,400,133 | £496,039,774 |
| London | 3,081 | 2,412 | £440,521,081 | £308,323,135 |
| South West | 3,268 | 2,787 | £240,538,562 | £198,757,026 |
| North West | 2,323 | 2,399 | £128,788,605 | £130,316,638 |
| East Anglia | 2,004 | 1,360 | £144,225,020 | £86,344,969 |
| East Midlands | 2,201 | 1,704 | £121,583,919 | £95,084,320 |
| West Midlands | 2,007 | 1,634 | £118,556,544 | £94,979,236 |
| Scotland | 1,568 | 1,854 | £86,584,205 | £101,026,421 |
| Yorkshire & Humberside | 1,628 | 1,724 | £88,528,759 | £92,049,565 |
| Wales | 1,212 | 885 | £66,636,650 | £50,421,433 |
| North East | 723 | 792 | £38,210,200 | £44,172,304 |
| Northern Ireland | 200 | 257 | £9,949,180 | £14,082,239 |
| UK | 27,666 | 23,747 | £2,154,522,866 | £1,711,597,148 |
