Q2 lending reached £1.6 bn with a 26% increase at the same time last year. To view the data in full click here or read what some of the industry’s leading experts had to say below.
Alice Watson head of marketing (insurance) at Canada Life said: “It is interesting to see the rising popularity of lump sum products, leapfrogging drawdown to become the most popular option among new customers. This could be the result of people looking to clear their existing mortgage at a time of maturity or seeking to support a loved one’s deposit for their first home. All this further highlights the real world applications of equity release and how property wealth can be used flexibly and effectively.”
Craig Brown CEO of Legal & General Home Finance said: “We’re pleased to see people continuing to take advantage of the increased equity in their homes, with over 200 customers choosing to release equity from property every day in Q2 of this year. Our recent ‘Equity Economy’ report, in partnership with the Centre for Economics & Business Research (Cebr), forecast that the average amount of equity released is set to rise above £170,000 within the next five years, even taking into account an expected slowdown in house price growth. Our report also highlighted that equity release funds currently account for one in every £90 spent by retired people within the UK, showing the industry is now seen as a mainstream source of funding”.
David Forsdyke head of later life finance at Knight Frank said: “Latest figures from the Equity Release Council show the market continues to grow at a tremendous rate, with a 26% increase year on year.
“In the high net worth market this growth is being driven by two main factors: Firstly we are seeing increasing numbers of wealthy home owners using the equity in their homes to gift to younger members of the family. Many see this as an effective and efficient way to redistribute their wealth, or as an essential part of their Inheritance Tax planning. Secondly we are helping home owners, especially those in London, remortgage or restructure their finances so they can stay in their homes. Many have interest only mortgages, and as their mortgage reaches the end of its term they need a longer term solution that allows them to stay.”
Dave Harris CEO More2life said: “What a difference two years can make. In Q2 2020, the Equity Release Council figures suggested that lending to new and existing customers was nudging £700m million and today, we are pleased to see that it has more than doubled in Q2 2022 to £1.6bn.
“While there is no doubt this is driven by increasing numbers of customers who are taking the proactive choice to include their largest single asset in their later life planning, advisers and the wider later life lending community has certainly played a role. There is much for the industry still to do and we need to continue to focus on how we can best meet customers needs but the Q2 figures suggest that we are on the right track.”
Kay Westgarth, head of sales at Standard Life Home Finance said: “It is really encouraging to see that the number of equity release plans agreed between April and June this year is up 26% on Q2 2021. While last year we were very much still feeling the impact of the pandemic, this type of bounce back is a sign of a strong market and bodes well for the second half of what promises to be a record year for the sector.
“The fact that over 200 plans are being agreed every single day demonstrates the value of equity release as a financial tool for a huge number of over-55s across the UK, particularly during these challenging economic times. It is also interesting to see that lump sum lifetime mortgages are coming to the fore, which suggests that more people are looking to finance big ticket items like gifting or repaying existing mortgages.”
Kay continued, “While moving borrowing from one mortgage to another is part of financial management for most homeowners, it is particularly valuable for over-55s who may be struggling to keep up repayments or meet affordability criteria. With all new equity release products offering ad hoc capital repayments, and many offering the opportunity to make ongoing interest repayments, based on guidance from their adviser, equity release products can be a huge support for many people looking to manage their borrowing with a fixed retirement income, enabling them to live comfortably in retirement.”
Mark Gregory, CEO of Equity Release Supermarket said: “The ramifications of Covid and the cost of living crisis is beginning to track and likely the main cause for a surge in people using equity release for emergency funds. We’re seeing more and more that having the broadest choice of voluntary repayment plans is also vital to boosting the most successful customer outcomes.
“Furthermore, independence and whole of market options remain the cornerstone of customer choice – it is the only true way to provide customers with the broadest set of options when looking at penalty-free plans.”
HUB Financial Solutions managing director Simon Gray said: “This is another strong quarter of data that shows a continued return to market growth after the disruption of the pandemic. These are by far the strongest first half figures ever seen and bode well for the rest of the year and beyond.
“This growth is underpinned by competitive interest rates and innovations such as medically underwritten rates and the Council’s new product standard allowing penalty-free partial repayments. The result is that the plans are becoming more customisable for different situations and this means professional advisers can personalise solutions for each unique client.
These are very long-term commitments that each customer needs to understand fully, whether their goal is bolstering their income, estate planning, providing cash lump sums, or paying for care.”
Just Group communications director Stephen Lowe said: “Demand for equity release has recovered strongly from the pandemic wobbles with the last three quarters each setting new lending records. The total amount released in the first six months of this year is more than £3.1 billion, 36% more than the previous H1 record of £2.3 billion in 2021. Clearly lifetime mortgages, which now account for virtually the entire equity release market, are becoming a keystone of financial planning for some customers alongside their pensions and other savings.”
Stephen continued, “The business drivers continue to be very strong. House prices are still rising, providers are competing hard for business with extra features such as interest-servicing and medically underwritten rates. Locking into today’s interest rates – still near historic lows – is appealing. It’s likely some demand is from people who put plans on hold during lockdown, alongside those starting to feel a squeeze from rising household costs.
“Homeowners may be using equity release to generate lump sums, extra income or for estate-planning but the key point for customers is that they seek out high quality advice to ensure the plan fits their unique needs and aspirations.”
Will Hale CEO of Key Group said: “At a time when the UK is facing a cost of living crisis unlike anything we have seen for many years, the fact that older homeowners can use what is often their most valuable asset to help them manage their finances in later life should be celebrated. The modern later life lending market is well-regulated and progressive offering a wide range of products with flexible features and valuable customer protections.
“With fixed interest rates for life and the ability to make both ad hoc capital as well as interest repayments, a lifetime mortgage can be an excellent option for an older borrower who is either unable to remortgage to a mainstream product or retirement interest-only mortgage due to affordability challenges or is facing a shortfall at the end of their interest-only mortgage term.
“Looking to the future as the later life lending market grows, we need to continue to put customer needs at the heart of the development of products and advice propositions and consider how we raise awareness of all the options available to an ever-more diverse customer base.”
Responsible Life executive chairman Steve Wilkie commented: “The cost-of-living crisis is now ricocheting through the equity release market. Rising interest rates have sparked a surge in the proportion of borrowers opting for lump sum mortgages over those with drawdown facilities.” Steve continued: “Rising interest rates are forcing up the cost of borrowing. This includes servicing unsecured debts, which borrowers are going to be keener than ever to pay down rapidly, fuelled by lingering uncertainty over how high interest rates will go. This can include credit cards, store cards, car and other loans. With the price of everything from fuel to housing at record highs, a desire to provide financial help to family members is also likely to be partly responsible. These are the sorts of financial outgoings that just won’t wait. Drawdown allows homeowners to access money when they need it, and not pay interest on that borrowing until they do.”
Air CEO Stuart Wilson commented: “The Q2 Figures from the equity release council make interesting reading as they clearly highlight the vital role that housing equity is playing for hundreds of over-55s across the UK. For far too long people have considered equity release as a niche market but as it takes its rightful place as a key part of the later life lending sector, it is now time to focus on growth and how we can better serve customers.
“The introduction of the fifth equity release standard which guarantees new customers the opportunity to make ad hoc capital repayments within lenders criteria was a great step forward but there is more to do. With property wealth making up a significant proportion of many older people’s assets, we need to consider how we ensure that when they plan their later life finances, they consider all their funding options carefully.”
To conclude Stuart said: “A vibrant and growing intermediary market will be at the heart of this and at AIR, we are committed to helping advisers build their expertise in this market and ultimately their businesses.”
