Equity release sees record year of growth

Equity release is becoming increasingly popular as a way to boost retirement income, with more and more people realising the benefits of using their housing wealth to their advantage. As a result, the sector is booming – not only did 2016 hit record levels of lending, but it looks as though 2017 could follow suit, with annual growth in the sector hitting an all-time high in the first three months of the year.

That's according to figures from The Equity Release Council, which show that annual growth in new equity release customers and total lending for the sector has truly taken off over the last year – a total of 8,351 new equity release plans were agreed in the first three months of 2017, an increase of 61% from the 5,175 recorded in the same period a year ago, a boost of over 3,000 customers. You can find out more about becoming one of those customers here.

The total value of that lending reached an impressive £697m during the quarter, up by 77% from the first three months of 2016, when the figure stood at £394m. In both cases, the year-on-year growth is the highest seen in any three-month period since quarterly records began in 2002, so the improved uptake is clear to see.

The figures also rose on a quarterly basis, rising from 8,303 new customers in the final three months of 2016, while the value of lending rose by 4% from £670m over the same period. This marks the first time since 2003 that the equity release sector has been busier in the first three months of a year than the final three months of the previous year, further highlighting its growing potential in the retirement income market.

"The early months of 2017 have bucked the seasonal trend of a slower start to the year, with both new customer numbers and total lending reaching record levels," commented Nigel Waterson, chairman of the Equity Release Council. "Alongside this, the annual rate of growth is also the fastest that the sector has seen, as equity release continues its progress to becoming a mainstream retirement product among older homeowners."

Nigel pointed out that much of the activity is due to increasing supply as well as growing demand, with the past year having seen new providers, products and flexibilities coming onto the market. Competition between those providers is increasing, too, with our own research showing that customers have never been better served – not only is there a growing number of equity release deals available, but average rates have fallen to record lows, so it could be a great time to consider your options.

"Equity release can offer a valuable solution to help meet the many and varied financial demands people face in later life, backed by a host of product safeguards along with financial and legal advice," added Nigel. "Consumers continue to find equally varied uses for their housing wealth, including paying off existing debt such as interest-only mortgages, helping younger generations onto the housing ladder, investing in home improvements and improving their lifestyles in retirement."

Given the possibilities, doesn't it make sense to see the kind of options available? One of your biggest questions could well be the type of equity release product to go for. While drawdown plans, which allow homeowners to release funds from their home as and when they require it, remain the most popular product type, the first three months of the year saw significant growth in lump sum activity. Indeed, the volume of new lump sum plans agreed rose by 94% from 1,719 to 3,337 year-on-year, while the total value grew by a whopping 110% from £153m to £321m.

Lump sum plans accounted for 40% of all new plans in the quarter, the highest market share since late 2009, as a growing number of homeowners seek to take a single significant payment from their home. This could be used for any number of reasons, from paying off existing debts to making home improvements, or even to purchase an annuity for guaranteed retirement income.

Alternatively, drawdown arrangements could be ideal for those who want to drip-feed funds into their bank account to supplement their retirement income as the years progress, boosting their lifestyle in the process. Whatever your requirements, you need to be confident you're making the right decision, so speak to an equity release expert to get started and see if you can benefit from your housing wealth without needing to downsize.