The equity release market grew to a record high of £5.58bn in new lending in 2022, new data published by Key Later Life Finance has shown.

This was a 27% increase on 2021, while plan sales also grew by 25% to hit 52,295 last year, more than 4,300 plans a month.

Once borrowing by existing customers via drawdown and further advances is included, Key’s data shows that total borrowing hit £6.3bn.

Although the long-term drivers of the market have remained strong, Key suggested that interest rates which increased sharply in Q4, and the reduction in the number of products available, saw lending volumes plateau following the government’s mini-Budget in September.

Figures indicate that Q4 is traditionally the strongest quarter of the year, however in 2022 it saw more modest lending amounts (£101,366) than Q3 (£108,180), as customers constrained by lower loan-to-values (LTVs) were cautious about borrowing.

“While hitting a record £5.58bn worth of new equity released is a sign of a vibrant market with strong underlying customer demand and a competitive product landscape, there is no denying that the mini-Budget created a different landscape in Q4 and one that has prevailed into the new year,” Key CEO, Will Hale, commented.

“Higher interest rates, lower LTVs and fewer products available, has meant that advisers have understandably adopted a prudent approach when helping customers consider their options.

“Balancing both short-term needs and long-term implications, customers and their advisers are sometimes delaying the decision to take equity from the home or taking out less as a lump sum in the knowledge that drawdown facilities and further advances may be accessed in the future as and when required.”

Furthermore, Key’s data revealed that an estimated £3.3bn of the property wealth released in the year was used to repay unsecured or secured debt, as new customers focused on strengthening their finances amid rising interest rates and inflation eating into retirement budgets.

Half of this total (50%) was used to repay existing mortgages while 38% was used to re-broke existing release plans, and 12% to pay off unsecured debts such as credit cards or loans.

“Across the full year the sector still helped people repay more than £3.3bn worth of both secured and unsecured debt,” Hale said. “Accompanied by appropriate specialist advice, this type of refinancing can be suitable for certain customers who may be struggling to meet their outgoings during the current cost of living crisis.”

He added: “It is particularly critical in this market that advice is highly personalised and that potential vulnerabilities are identified and taken into account through the process. Equity release can only be accessed with the support of a specialist broker and with the customer having received independent legal advice.

“As we move through 2023 we expect more and more people to choose to start that conversation and therefore take the first step towards finding a suitable solution for their individual circumstances now and in the future.”

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