New lending in the equity release market reached £1.53bn in the third quarter as the average customer released more than £114,000 in property wealth to boost their finances.

New data from Key Later Life Finance has revealed that the value of new equity released was up from £1.05bn in Q3 last year, while plan sales grew by 29% compared with the same quarter last year to hit 13,341.

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

Key stated that financial management has remained the main driver behind the equity release market, with 60% of the amount released being used to manage debt – either to clear mortgage borrowing (28%), re-broke an equity release plan (25%) or repay unsecured borrowing (7%) – as the cost of living crisis continues to encourage over-55s homeowners to reduce their outgoings.

However, the data also showed that one in five customers (20%) are still looking 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 or subsidise university fees. 

“While there is no doubt that we did see the market return 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 LTVs available,” commented Key CEO, Will Hale.

“However, 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.

“With over-65 homeowners sitting on an estimated £3trn 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.”

Key has also estimated that while the market transacted 1,004 remortgage cases last year, this doubled to 2,268 in Q3 this year, as lower interest rates encouraged customers to re-broke. Q3 saw the average customer move a balance of £115,817 from an interest rate of 5.1% to 4.6%.

Furthermore, at the end of the quarter, there were 582 products on the market with all new products offering penalty-free ad hoc capital repayments, 65% including downsizing protection and 63% allowing customers to serve interest. 

Commenting on the Key figures, CEO at Air, Stuart Wilson, added: “Making ad hoc capital repayments is now a standard feature offered by all new products and customers are actively being encouraged to manage the roll-up of interest by making ongoing payments.  These products are arguably becoming more akin to residential mortgages but with more protections such as the no-negative equity guarantee.
 
“Downsizing protection (65% of products) and inheritance protection (34%) are also increasingly common. Early repayment charges which have long been a bugbear for some customers now start from as little as five years with the majority being fixed (64%) or offering the choice between fixed and variable (34%). 
 
“Navigating the challenges ahead will not be easy but if advisers focus on helping customers to find the right option for their individual circumstances, the market will continue to thrive and grow.”

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