Equity release activity dips as market adjusts to higher interest rate environment

Summary

• The number of new and returning equity release customers active between January and March this year dipped to 16,691, down 19% from 20,597 in Q4 2022 and down 29% from 23,395 a year earlier.
• Total lending of £699m made Q1 2023 the quietest by this measure since Q2 2020.
• New customers reduced their loan sizes in Q1 with the average first release from a new drawdown lifetime mortgage down 34% year-on-year to £61,785, the smallest seen in almost six years.
• February was the quietest month of Q1 2023, with the number of new plans picking up in March, as product pricing continued to recover from its peak in November 2022.

David Burrowes, Chair of the Equity Release Council, said:

“People have had to adjust to the realities of a higher interest-rate environment in many aspects of their personal finances.

“These figures show the equity release market has been no exception, although there are early signs, with decreasing rates and returning appetite, that a recovery is underway.

“Suitability and timing are everything when it comes to deciding to release equity. For some, it has made sense to continue with their plans.

“Other would-be customers have evidently been biding their time to see what interest rates do next.

“Homeowners with a present need have proceeded cautiously with average loan sizes at their lowest since 2017 in some cases, despite a 30% rise in house prices during that time.

“Anyone who unlocks money from their homes can do so safe in the knowledge that recent production innovations can work in their favour by giving them options to keep costs under control.

“Every product that meets Council standards allows people to make penalty-free partial loan repayments, reducing the build-up of interest.

“In addition, almost every product now offers early repayment charges that reduce to zero, making switching plans more practical in future if interest rates fall.

“Seeking advice from a Council member is essential to weigh up short and long-term considerations so that customers understand all their options and alternatives when making a plan.”

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