New equity release lending hit £1.5 billion in the third quarter, with the average customer across the UK releasing more than £114,000 in property wealth, new data from equity release adviser Key Later Life Finance showed.
Plan sales grew by 29% in the three months to end of September to 13,341, compared to the same period of last year, while the value of new equity released rose to £1.525 billion.
Key said both sales and the total value of new equity released rose across every region in the UK, with only London and Scotland reporting single-digit growth in plan sales. However, the value of new equity continued to increase significantly in both areas, with Scotland recording a 34% jump and London a 65% increase.
The South East recorded the most plan sales, but more plans were sold in the South West, North West, East Midlands and West Midlands than in London.
Financial management remained the main driver behind the higher figures, with almost two thirds (60%) of property wealth being used to manage debt, including to clear a mortgage, rebroke an equity release plan and repay unsecured borrowing.
The report said “financial prudence borne out of the pandemic and heightened by the cost of living crisis” is encouraging over-55s homeowners to reduce their outgoings.
The data also revealed that one in five customers used equity release to support their families, with an average of £53,503 being gifted to help loved ones on to the property ladder, provide an early inheritance, repay debts and subsidise university fees.
The number of customers remortgaging existing equity release deals also continued to rise, with 17% making use of the enhanced flexibility of current products, compared with 14% in the same period of 2021.
According to Key, the market transacted 1,004 remortgage cases last year but this doubled to 2,268 in the third quarter of 2022 as lower interest rates encouraged more customers to rebroke. The average customer moved a balance of £115,817 from an interest rate of 5.1% to 4.6% during the third quarter.
Will Hale, CEO at Key, said: “While there is no doubt that we did see the market return to more normal post-pandemic trading conditions in Q3 2022, the political and economic turmoil over the last few weeks has, like the mainstream mortgage sector, impacted the rates and LTVs available.
“With over-65 homeowners sitting on an estimated £3 trillion of unmortgaged property wealth and four in five of the customers who progress to speaking to one of our advisers looking to address a financial need there is a clearly a key role for the sector to play in helping older customers navigate through the current economic challenges and still live a fulfilling later life.”
Hale said lifetime mortgages had “come a long way in a short period of time”, offering customers features such as drawdown and the ability to make ad hoc capital repayments free of early repayment charges.
Hale added: “In these market conditions more than ever before, specialist advice is crucial, Advisers must be prepared to probe and challenge customers on their wants and needs, making them acutely aware of the implications of decisions in both the long and short term and ensure highly personalised recommendations aligned to individual circumstances. All options should be considered as equity release won’t be right for everyone.”
[Main image: luke-thornton-oEdZ9alDRPQ-unsplash]
