Equity Release Lending Surges to All-time High in Q2 Following Pension Freedoms

28 July 2015 | Equity Release Council

Embargoed for 00.01 on Tuesday 28 July 2015

 

Equity Release Lending Surges to All-time High in Q2 Following Pension Freedoms

  • Q2 2015 lending of £384.3m is largest of any quarter since 2002
  • Homeowners aged 55+ withdraw £4.2m of housing wealth each day
  • More than 5,400 new equity release customers, up 11% from last quarter
  • New plans taken out in H1 2015 top £710m – the largest H1 total on record
  • Lump sum lifetime mortgage lending hits eight year high in H1, but drawdown grows faster year-on-year

Equity release lending to UK homeowners over the age of 55 totalled £384.3m in Q2 2015, the largest amount for any quarter since records began – surpassing the previous high of £375.4m reached in Q3 2014.

 

Industry figures from the Equity Release Council (The Council) show the value of housing wealth released in Q2 2015 was up 18% both on the previous quarter and last year’s Q2 total of £325.6m.  Homeowners aged 55+ effectively withdrew £4.2m of housing wealth every day from April to June.

 

This uplift comes despite savers gaining greater access to their pension pots under the freedoms launched on 6th April. With house prices rising again, it shows the growing appeal of using property wealth as an extra source of retirement income in later life. 

 

Record lending in Q2 meant the total value of equity released in the first six months of 2015 hit £710million, the largest sum on record for the first half of the year and an 11% increase on H1 2014.

 

There were 5,414 new equity release customers in Q2 2015, an 11% increase on the last quarter: pushing the total number of new customers past 10,000 for the first six months of 2015.

 


Graph 1: Equity release total lending by quarter – 2012 – 2015

Graph 1

Lump sum mortgage lending hits an eight year high – but momentum is with drawdown

The value of lending, via lump sum lifetime mortgages, increased by 10% year-on-year in H1 2015 to reach £285.3m. This is the highest total for lump sum activity in the first half of any year since H1 2007 when the value hit £355.9m.

 

However, the value of lending via drawdown lifetime mortgages surpassed this rate of growth, rising 12% year-on-year from £379.2m (H1 2014) to £423.5m (H1 2015). It also rose faster from Q1 to Q2 (21% vs. 14% for lump sum products) as customers took advantage of the flexibility to withdraw their housing wealth in regular instalments rather than as a one-off amount.

 

Table 1: Growth of lending via lump sum and drawdown lifetime mortgages

 

Q2 2015

H1 2015

Quarterly growth

Annual growth

Annual growth

Lump sum

14%

18%

10%

Drawdown

21%

18%

12%

 

Home reversion plans account for less than 1% of the overall equity release market, yet these too saw an increase of 18% in lending from £534,765 in Q1 2015 to £632,647 in Q2 2015.

 

Nigel Waterson, Chairman of the Equity Release Council commented:

“The last three months have been a landmark period for UK retirees and those approaching retirement, and equity release activity continues to grow amid a sea of change. There is no doubt the pension freedoms have created more options for people to consider, but the appeal of tapping into housing wealth is on the rise as older consumers seek to make use of all the assets at their disposal.

 

“Doom and gloom often surrounds discussions on retirement income, but while contributions to pension pots remain low, an entire generation of homeowners have been paying into property their whole lives: making it an asset that can transform their financial options beyond the age of 55. Anyone seeking advice on how to plan their retirement should consider their property as a valuable source of wealth.

 

“With the mainstream mortgage market grappling with issues of so-called age discrimination in the wake of the Mortgage Market Review (MMR), it is time to build bridges and encourage more focus on equity release as a source of finance in retirement. New providers promise to bring more innovation to the equity release arena this year and will help to satisfy the rising demand.”

 

-Ends-

 

For further information, please contact:

  • Andy Lane, Victoria Heslop or Sam Fisk at Instinctif Partners, on 020 7427 1400 or email [email protected]

 

About The Equity Release Council:

The Equity Release Council is the industry body for the equity release sector. Built on the legacy of SHIP, The Council represents over 400 members; namely, providers, qualified financial advisers, solicitors, surveyors, intermediaries and other industry professionals – each committed to The Council’s Statement of Principles that aims to ensure consumer protections and safeguards. In addition, The Council works to boost consumer knowledge and increase awareness of equity release as a solution to financial challenges facing people over the age of 55 across the UK.