Experts predict trend will continue as inflation and house prices rise
Customers over the age of 55 used equity release products to unlock a total of £1.53 billion of property wealth in just the first three months of 2022, according to statistics from the Equity Release Council (ERC).
The 2022 first quarter figure was 14% more compared to the £1.34 billion in Q4 2021 – previously the busiest quarter on record – and also 34% higher when compared year-on-year.
A total of 23,395 new and returning customers used equity release products to access money from the value of their homes from January to March 2022, reaching a new quarterly high.
This was up from 19,975 in Q4 2021 and 16,527 in Q1 2021 when pandemic restrictions were still in place.
ERC said this is the first time that total customer numbers have exceeded 23,000 in any quarter, with activity having fallen as low as 13,617 at the height of the pandemic in Q2 2020.
“The popularity of equity release so far this year is the natural result of modern products offering greater flexibility and a property market where growth has far outstripped inflation, alongside an ageing population,” David Burrowes, chair of the Equity Release Council, said.
“After two years where customer numbers have been subdued by the pandemic, realising gains from rising house prices can make a major difference to people’s quality of life,” he added.
ERC statistics showed that the two years of pandemic conditions starting from Q2 2020 have seen 150,653 new and existing customers access property wealth via equity release plans, compared with 171,586 in the previous two years ending at Q1 2020.
The number of new plans agreed reached 12,174 in Q1 2022, a 21% increase year-on-year from 10,030 in Q1 2021, which was down 9% from the previous year as a result of pandemic conditions.
ERC also revealed that the average new loan size grew 6% year-on-year, matching the latest inflation figure and was surpassed by the 11% annual UK house price rise which added £27,000 to the average home.
“Not only are more people considering equity release, but they are doing so for many different reasons, and helping old and young alike to fund everyday costs and major life events,” Burrowes said.
“Innovation has made equity release products more adaptable to customers’ changing circumstances. Our standards mean lifetime mortgages remain the most secure type of retirement home finance, with customers protected from interest rate rises, repossession and passing on debt due to negative equity,” he added.
Will Hale, chief executive at Key Later Life Finance, commented that the ERC figures not only highlight a record quarter for the industry, but also demonstrate the growing significance of the sector for the UK economy and for household finances.
“Whether money released has been used to boost spending power, manage debt or support family, it has made a real difference to many people which underlines the true strength of the vibrant later life lending market,” Hale said.
David Forsdyke, head of later life finance at Knight Frank Finance, shared that wealthier homeowners are continuing to access their property wealth in order to gain flexibility and tax efficiency.
“We are working with an increasing number of wealth managers and financial planners using equity release as a tool for income in retirement and for inheritance tax or estate planning,” Forsdyke said. “Greater care is needed when giving advice to high-net-worth homeowners, and we must continue to join with, and support, other trusted advisers.”
Stuart Wilson, corporate marketing director at more2life, predicted that in the second quarter, it’s likely that with inflationary pressures adding to existing demographic drivers, more over-55s will tap into their equity while house prices remain high.
“Until inflation starts to ease, we anticipate that we will see the number of borrowers using later life lending to reduce the pressure on everyday expenditure continue to build,” said Wilson, who is also the chief executive at Air Group.
“This makes it even more vital for equity release lenders to work closely with advisers – and vice versa – so the later life finance market can build off its current momentum to meet the rising demand and continue to provide the best possible support for over-55s exploring their financial options,” he added.
“Whether over-55s are keen to increase their income to meet the current inflationary challenges, manage modest retirement savings or help family members, it is vital that they carefully consider all their options – including housing equity,” Kay Westgarth, head of sales at Standard Life Home Finance, said.
The ERC’s market statistics are compiled from member activity, including all national providers in the equity release market. Its latest edition was produced in April 2022 using data from customer activity during the first quarter of the year.
