Equity release new lending hits £1.5 billion

New plan sales grew by 29% in Q3 this year

Equity release new lending hits £1.5 billion

New lending in the equity release market reached £1.5 billion in the third quarter of 2022, with the average customer releasing more than £114,000 in property wealth to boost their finances, according to equity release adviser Key Later Life Finance.

New data from Key’s Market Monitor report also showed that new plan sales grew by 29% in the three months to the end of September, compared with the same quarter last year.

The average amount released rose to £114,354, with customers in London releasing £261,946 on average. Older homeowners in the South East, South West and West Midlands all released more than £100,000 on average.

Key said financial management remained the main driver behind the market with almost two-thirds (60%) of the amount released being used to manage debt – clear mortgage borrowing (28%), rebroke equity release plan (25%), and repay unsecured borrowing (7%).

One in five customers (20%) still looked to support their families with an average of £53,503 being gifted to help loved ones onto the property ladder, provide an early inheritance, repay debts, and even subsidise university fees.

Meanwhile, the number of customers remortgaging existing equity release deals continued to rise with 17% making use of the enhanced flexibility of current products compared with 14% in the same period of 2021. Key estimates the market transacted 1,004 remortgage cases last year. But this doubled to 2,268 in this year’s third quarter as lower interest rates encouraged customers to rebroke. In Q3 2022, the average customer moved a balance of £115,817 from an interest rate of 5.1% to 4.6%.

Read more: Equity release loan values reach record high.

Will Hale (pictured), chief executive at Key Later Life Finance, noted that while the market had returned to more normal post-pandemic trading conditions in Q3 2022, the political and economic turmoil over the last few weeks has, like the mainstream mortgage sector, impacted the rates and loans to value (LTVs) available.

“The cost-of-living crisis has continued to bite, inflation has hit double digits and older customers moving from fixed-rate mortgage deals to their lenders standard variable rate have been shocked by the difference,” Hale said.

“With over-65 homeowners sitting on an estimated £3 trillion of unmortgaged property wealth and four in five of the customers who progress to speaking to one of our advisers looking to address a financial need, there is a clearly a key role for the sector to play in helping older customers navigate through the current economic challenges and still live a fulfilling later life.” 

Hale added that modern lifetime mortgages had come a long way in a short period of time and there was more opportunity than ever before for customers to carefully manage their borrowing.

“The proliferation of fixed early repayment charges which typically disappear after around 10 years – although it can be as low as five years – also mean that remortgaging these plans in future is a real option for many people,” he said. “In these market conditions, more than ever before, specialist advice is crucial.

“Advisers must be prepared to probe and challenge customers on their wants and needs, making them acutely aware of the implications of decisions in both the long and short term and ensure highly personalised recommendations aligned to individual circumstances. All options should be considered as equity release won’t be right for everyone.”