The value of new equity released from UK properties totalled just £569.9m in the first quarter, significantly down from £1.40bn in Q1 2022.

According to new data published by Key Later Life Finance, plan sales also dropped from 12,551 to 6,975 over the same period.

While Key’s analysis indicates that demand remains high, the Government’s mini-Budget has impacted rates, product availability and loan-to-values (LTVs) which has seen fewer people access their equity in what has traditionally been the strongest quarter for the equity release market.

Key has suggested, however, that “green shoots” are emerging in the equity release market, which suffered shockwaves from the mini-Budget last September that caused turmoil in the mortgage market.

The equity release lender also suggested that a “cautious” approach from customers, supported by specialist advice, has also dampened volumes and put to rest fears that equity release is being used as a short-term solution for the cost of living crisis. Figures showed that customers on average still released £81,703 in Q1, which was down on the £111,511 released on average at the start of last year.

CEO at Key, Will Hale, commented: “There is no denying that the first quarter of 2023 was a tough one for the equity release industry. However, as rates start to fall, confidence returns and the product flexibilities are increasingly appreciated, green shoots are returning to the market with April and May seeing more positive volumes.

“Speaking to customers, we know that there is pent up demand as people look to boost retirement income, tackle rising costs and support their families. However, with the support of their adviser, they are being cautious around when to borrow, how much to borrow and considering if there are other options which better support their needs – both in the long and short term.”

Hale also stated that Key is anticipating customers will return to the market determined to “make more use of the flexibilities”, such as the ability to service interest or make ad hoc penalty-free repayments.

“The recognition of the value that these features provide is vital and I would be entirely unsurprised if we saw innovation accelerate in this market, as we seek to bridge the gap in the later life lending market for those customers whose needs are not currently being met due to the LTV constraints with traditional lifetime mortgages, and affordability barriers with retirement interest only mortgages,” he added.

“This, to my mind, is what will help to ensure that the remaining quarters of 2023 are more akin to those seen in previous years and we are able to help those customers who may need a later life lending option but have a more diverse set of requirements than we can currently cater for.”

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