ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Advertisement

Image of Mike Brown

Michael Brown

Acting Editor
Published: 02/08/2022
elderly couple looking at documents

Consumers borrowed approximately £700 million more in the year’s second quarter when compared to the year’s first three months.

Consumers borrowed £1.6 billion through equity release between April and June this year, according to the latest figures from the Equity Release Council (ERC). This equates to £700 million more than what was borrowed in the first three months of the year.

The current cost of living pressure is driving many people to take stock of where their wealth lies and for many people their property is a largely untapped resource,” said Alice Watson, Head of Marketing, Insurance at Canada Life.

Much of this rise in borrowing has been driven by new customers in the market, with the number of new plans in this year’s second quarter increasing by 26% when compared to the “subdued” market of last year’s same period, according to the ERC’s research.

As well as more customers, the equity release market has seen a growing number of products and rates on offer. Compared to 2019, there are over three times as many equity release products on the market.

In addition, in July this year Moneyfacts research found equity release rates at a six year high.

Lump sum or drawdown?

New customers preferred lump sum lifetime mortgages over drawdown lifetime mortgages, a trend which has not been identified for the past 13 years.

This could be a result of consumers’ desire to gift money to younger family members in order to fight the cost of living crisis, according to David Burrowes, Chair of the ERC.

Watson, however, also noted that the reversal of this trend could be attributed to consumers looking to repay their mortgage at a time of maturity.

Introduction of the fifth product standard

On 28 March this year, the ERC announced the launch of the fifth product standard, the effect of which can be seen in these latest statistics following its first full quarter.

The fifth product standard is a product feature which enables borrowers to make a penalty-free partial loan repayment, mitigating the effects of compound interest, and cut the cost of borrowing.  

“Our new product standard [ensures] people have the freedom to reduce their borrowing if circumstances change,” said Jim Boyd, CEO of the Equity Release Council, in a press release in March.

While this product feature is welcome in the market there are still factors to consider, according to Stuart Wilson, CEO of equity release company Air.

“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,” he explained.

If you are considering equity release as a form of funding, speaking to our equity release partner Mortgage Advice Bureau Later Life to discuss your options. 

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.