In the second half of 2018, the number of equity release customers increased by 23 per cent year-on-year, taking the total number to 43,879, including 24,907 agreed new plans, the Equity Release Council (ERC) revealed.

In its Spring 2019 Market Report, the ERC found that drawdown lifetime mortgages remained the most popular type of new plan, with 64 per cent of new customers opting for drawdown plans in H2 2018, just 36 per cent of new customers chose lump sum plans. Although, home reversion plans continued to fluctuate over the period, accounting for just 1 per cent of new customers.

Despite the growth, the average size of lump sum plans in the second half of 2018 was lower than in the second half of 2017, at £93,966 and £101,203 respectively. However, the average drawdown plan increased slightly year-on-year, growing to £38,094 from £36.061.

Furthermore, the ERC highlighted that the steady growth of activity saw over £1bn of property wealth released in both Q3 and Q4 2018 and, as a result, consumers aged over 55 collectively accessed 50p of funds from their homes during 2018 for every £1 of savings via flexible pension payments under ‘pension freedoms’.

This is an increase from the 47p reported in 2017 and peaked at 57p in Q4 2018, mirroring the seasonal pattern in 2017, whereby pension withdrawals slowed from Q2 to Q4 while property wealth withdrawals steadily rose throughout the year.

The report identified that total equity release withdrawals grew by 29% (£885m) year-on-year to an unprecedented £3.94m for 2018, while flexible pension payments grew 20% (£1.29bn) to £7.83bn.

Commenting on the report, more 2 life CEO Dave Harris said: “With lifetime mortgages experiencing a staggering 25% annual increase in new loans last year, we are delighted to see that product innovation has been a key factor in this impressive growth. Modern lending features such as downsizing protection, inheritance protection and flexible capital repayments offer borrowers greater flexibility and choice.

“If the industry is to continue growing at this rate, it will be essential to listen to advisers about what their clients want and need from later life products. However, it’s not only product innovation which will be important for industry growth.

“As demand for equity release rises, the sector must also invest in new technology to keep up and deliver the level of service that today’s retirees expect. Delivering quick processes, expanding our product offerings and providing user-friendly accessible solutions for borrowers, will stand us in good stead for maintaining the robust growth we have seen in recent years.”

Legal & General Retail Retirement chief executive Chris Knight added: “Lifetime mortgages are now firmly part of everyday retirement planning. Equity release was the fastest growing part of the mortgage market last year and accounted for a third of all mortgages taken out by Britain’s over-55s.

“Changes in the way we live in retirement, the decline of final salary pensions and more big names like Legal & General entering this sector have all helped to raise awareness about the positive role lifetime mortgages can play in later life.

“However, innovation in the market over the last year has also created much more choice and flexibility for consumers, pushing the market forwards. Lenders such as ourselves have stepped up to support interest-only customers with optional payment lifetime mortgages, and consumers now even have the option to access their housing equity as a regular fixed income.

“As a generation of asset-rich but cash-poor retirees increasingly look to release their housing wealth whether to pay for home improvements or help their children onto the property ladder, demand for lifetime mortgages will continue to grow. The next challenge for this market is matching that demand with distribution.”

Share Story: