Equity Release Council publishes Winter 2024 Market Report, ‘From niche to normal and beyond: charting the evolution of a socially vital market.’

• Mortgage sales to customers aged 56+ have fallen since 2005 to just 84,576 last year – just 48% of the 175,260 loans made to older customers twenty years ago
• The over-56 population has grown by 31% in the last two decades while mortgage approvals in this age group have dropped by 52%
• In 2005, there was one mortgage approved for every 91 people aged 56+ in the UK, but the ratio has since fallen to one approval for every 246 older people
• Regional analysis debunks the myth that equity release is more common in the South as product availability, rates and loan-to-values show signs of recovery

Green shoots of recovery are emerging in the equity release market at a time when the UK is facing up to significant unmet demand for later life mortgages, according to the Equity Release Council’s Winter 2024 Market Report.

The Council’s analysis of regulatory data shows the total number of mortgage completions by people aged 56+ dropped from 175,260 in 2005 to just 84,576 last year.

This 52% fall at a time of significant product innovation – with more flexible lifetime mortgages including mandatory payment plans emerging alongside a variety of retirement mortgages – suggests that significant unmet demand will need to be addressed as the market recovers.

Increasing longevity means that the number of people aged 56+ has grown by 31% since 2005 to almost 21 million. However, mortgage approvals have followed a different trajectory with fewer older borrowers taking out products.

In 2005, there was one loan completion for every 91 people aged 56 and over in the UK, but the ratio has fallen to the extent that 2023 saw just one completion per 246 people.

Table 1: Population growth and mortgage sales among the over-56 age group

Source: Equity Release Council analysis of Government and regulatory data

Regional trends debunk the myth that equity release is a Southern phenomenon:

During the post credit-crunch recovery over the last decade, the Council’s analysis shows the number of people taking out lifetime mortgage has grown across every UK region except the North East, which itself saw significant growth up until 2022.

Eight out of 12 regions registered double-digit growth between 2014 and 2023. Wales (+44%), the East Midlands (+23%) and the East of England (+21%) recorded the strongest growth rates, debunking the idea that those releasing equity are clustered in the property-rich south.

Comparing the regional spread of those taking out lifetime mortgages to the split of over-55s’ property wealth, both the South East (with 21% of property wealth vs. 12% of completions) and London (12% vs. 9%) actually under-index with a lower share of completions than property wealth.  Northern Ireland (2% vs. 1%) also under indexed.

Of the remaining regions, eight outperformed with the South West (18% of equity release cases vs. 11% of property wealth) leading the pack, along with the East Midlands (9% vs. 7%) and North West (10% vs. 9%).

Graph 2: Regional property wealth and lifetime mortgage completions (2014-2023)

Source: Equity Release Council analysis of Government, Bank of England and FCA data

Product availability and lending criteria show signs of recovery

While lending has been subdued this year, product availability in the equity release market has rebounded as 2024 has progressed. The Council’s analysis of data from AdviseWise shows there were 212 more product launches than withdrawals (4,083 vs. 3,871) between August and October.

Rates have also stabilised, with average APRs for new lifetime mortgage products reaching a year-low of 6.31% in September 2024 – a marked improvement on the 7%-plus averages seen last year.

Despite fluctuating economic conditions, loan-to-value (LTV) ratios for lifetime mortgages at age 70 have edged back towards pre-pandemic levels.  With significant numbers of older homeowners looking at equity release to help manage their interest-only mortgage borrowing, this move has allowed lenders to support more customers.

This has widened access to larger sums of property wealth, helping homeowners who need to release more to meet obligations such as interest-only mortgage repayments.

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

“While lending volumes may be subdued for now, there is no denying the giant strides which have been made in equity release product design and distribution, advice and public perceptions in the post-regulation era.

“We know the current recovery will be a gradual process with no overnight return to the £6bn+ market of recent years. At the same time, the potential is there to go far beyond this high watermark in the future, and it’s important we turn this reset period into a positive.

“Property wealth has long been one of the most significant assets available to UK households. Advances in lifetime mortgage product design have made it significantly more attractive to access and are likely to be seen in years to come as a major milestone in bridging the gap between residential homeowner mortgages and the later life market.

“The pause in growth provides a chance to focus on the next steps needed to create the sustainable later life mortgage market of the future which our ageing population sorely needs. In a climate of growing pension challenges, property wealth will play a crucial role in bridging the gap between aspirations and affordability in later life.

“The Council is focused on working with industry, regulators, and policymakers to ensure consumers receive the best advice and make informed, confident decisions about their financial futures.”

ENDS

Notes to Editors

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About the Equity Release Council

The Equity Release Council (the Council) is the representative trade body for the UK equity release sector with more than 750 member firms and 1,800 individuals registered, including providers, funders, regulated financial advisers, solicitors, surveyors and other professionals.

It leads a consumer-focused UK based equity release market by setting authoritative standards and safeguards for the trusted provision of advice and products. Since 1991, more than 680,000 homeowners have accessed over £50bn of property wealth via Council members to support their finances.

The Council also works with government, voluntary and public sectors, and regulatory, consumer and professional bodies to inform and influence debate about the use of housing wealth in later life and retirement planning.

For more information:

Visit www.equityreleasecouncil.com