Equity release popularity continues to grow

Last year saw equity release grow considerably once again, attracting twice as many new customers compared to five years earlier. The second half of 2017 alone saw 35,540 customers, with more new plans agreed in those six months than in the entirety of 2012.

More customers and more money

Annual growth across 2017 exceeded the entire size of the market in 2010 and 2011, according to the Equity Release Council's recently released Spring Market Report. These impressive results reflect the fact that equity release is increasingly seen as a mainstream option for older homeowners looking to gain some extra funds in retirement.

Specifically, a record £3.06 billion was borrowed last year, marking an increase of £909 million compared with 2016's figure of £2.15 billion. Aside from this growth in lending activity being more than the total figures for 2010 (£804 million) and 2011 (£789 million), it was almost as much as 2012's total activity (£926 million).

The most popular type of equity release by far is the lifetime mortgage, with only 27 home reversion products taken out in the second half of 2017, as all of the other plans were for lump sum or drawdown lifetime mortgages. This equity release mortgage type also saw the fastest growth in the overall mortgage market, with 12% annual growth in remortgage numbers, 8% for first-time buyers and 5% for homemovers.

In contrast, lifetime mortgage activity saw an increase of 34% in 2017 compared to the previous year. While this is an entirely different type of mortgage, since you can only get it once you've already paid off the original mortgage on your home and you won't have to pay any interest (unless you choose to) in your lifetime, it's still a clear indication that more and more people are taking advantage of this type of borrowing.

Lower rates as providers compete

It seems to be a particularly good time to get on board, as average rates continue to fall despite November's base rate rise. In fact, the average interest rate on equity release products stood at 5.14% in January. This marks a decrease of 0.16% compared with July 2017 and a 0.23% drop year-on-year.

New drawdown customers have even more reason to cheer, as not only do they make up the vast majority of the equity release market (76% in the second half of 2017), they also benefit from lower rates, at 4.17% compared to 5.31% for those looking to take out a lump sum of money. Drawdown plans come with the further benefit that you won't need to pay interest on funds that you haven't 'drawn down' yet. So, if you don't need all the money in one go, you can limit how much interest is taken from your property after death.

This decrease in equity release rates while the rest of the market is going up can be partly explained by increased competition. The range of products that are available has grown by 25% year-on-year, with 69 product options available in January 2017, up to 86 this January.

These products also offer more options, with 70% now offering consumers the choice to make penalty-free voluntary or partial repayments, which can minimise the build-up of interest or even reduce the loan itself over time. Additionally, almost half (49%) of products now come with inheritance guarantee, so you can make sure your loved ones will still inherit something from your property wealth after you're gone.

What next?

All this means that if you are over 55 and own your own home, it might be a great time to consider equity release. For those who are not sure what equity release is or why to get it, you'll find plenty of detailed information under the table on the equity release page.