Equity Release Spending Spikes to All-Time High

A new report from the Equity Release council suggests that equity release lending in the United Kingdom has once again hit an all-time record high. Having experienced a quite enormous spike during the closing months of 2015, the market saw its strongest growth in performance in eight years.

According to the report, the average sum equity release customers unlocked by way of drawdown mortgage schemes was just over £49,600 in 2015. In addition, the report also noted the fact that as property prices continue to accelerate across the UK, more homes than ever before are in fact ‘earning’ more than the average employed occupant. For homeowners aged 55 and over, the appeal of equity release is growing like never before, particularly those who are no longer working, for whom retaining tenure and releasing what could be a huge chunk of wealth represents a prospect with enormous advantages.

The report found that equity release is actively pursued predominantly by those aged between 65 and 74. However, the past year saw enormous growth in interest among the 55 to 64-age bracket, among which approximately half chose lump sum lifetime mortgages.

Across the whole country, the average initial advance paid on drawdown mortgages was considerably more than a full year’s salary. In London, the average initial advance was even higher, coming in at over £72,000 and equating to almost three years’ full pay.

For those choosing lump sum payments, the average across most of the United Kingdom was the equivalent of at least two years’ full salary. In Scotland, this dipped to 91 weeks’ worth of pay, while lump sum customers in London netted a whopping 373 weeks’ income on average – just under £210,000.

The second half of 2015 brought about an exceptional increase in equity release activity, some 26% higher than the rate recorded in the first six months of the year. Indeed, the second half of every year since 2011 has brought about the same pattern, though with not quite as dramatic increase as Q2 2015. The total value of equity release lending transactions for the second half of the year hit £898 million, up considerably from the £710 million of the first six months.

The Equity Release Council attributed much of the growth to wider availability and greater choice of options.

“Equity release products continue to prove versatile in helping customers meet a range of financial needs before, at and during retirement. As a result, there is growing recognition from UK consumers, regulators and politicians that housing wealth can, and should, play a greater role in financial planning for retirement,” commented chairman of the Equity Release Council, Nigel Waterson.

“Greater choice from new and existing providers is driving the appeal of equity release, with product features emerging that allow more freedom to make capital repayments and pay interest on some loans. We expect this trend to continue, and the challenge for industry and regulators is to ensure product innovation is combined with consumer protection and long term sustainability,”

“Building closer relationships with the mortgage and later life markets is also crucial so that, where appropriate, more consumers can access specialist financial and legal advice to make an informed choice about equity release.”

For more information on equity release or any matters relating to your own savings and retirement, get in touch with the Haven IFA team today.