Equity Release Market Springs Back to Life After a Year in the Doldrums

In a welcome sign of resilience, the equity release market in the UK is showing signs of life after what seemed like a yearlong slumber. For the first time in a year, there’s a bit of a buzz with an increase in both the number of new customers flocking to equity release and the total amount of money being borrowed.

Vital Statistics: Numbers on the Rise

The third quarter has brought some cheer, with total lending reaching £716 million. This financial boost was shared among 7,379 new customers and 8,466 returning customers who chose to draw more from their existing loans. When it comes to how much people are borrowing, the average first-time withdrawal stands at £63,238, while the average lump sum is a heftier £94,806. But let’s add a pinch of reality: these figures are still about a third less than what they were last year.

Still Climbing Out of the Trench

Despite these green shoots, the market is still playing catch-up to its own past, with the number of new customers and total lending trailing behind by 45 per cent and 58 per cent respectively when compared to last year’s figures. It’s as if we’ve stepped into a time machine and landed back in 2017.

The Chairman’s View

David Burrowes, the chair of the Equity Release Council, has thrown in his two cents. He sees these numbers as the first tentative steps on the long road to recovery, suggesting that the market is slowly rebuilding itself after a period that saw consumers and the industry alike hitting the ‘reset’ button due to higher interest rates. He’s optimistic yet cautious, hinting at a “gradual but fragile” path to recovery. Burrowes also points out that there’s likely to be a surge in demand waiting in the wings as interest rates start to change course down the line.

Innovations and Protections

Even as the numbers are starting to look up, there’s more to smile about. Product innovation hasn’t been asleep at the wheel. According to Burrowes, new lifetime mortgage plans that adhere to high consumer standards are now more flexible than ever. Customers can make voluntary repayments to manage costs, and those who’ve borrowed previously can rest easy knowing their rates won’t spike.

Equity Release: A Piece of the Retirement Puzzle

Burrowes insists that the industry must stay committed to positioning equity release as a viable option among a variety of later-life lending choices. He advocates for the integration of property wealth into retirement planning conversations, ensuring it takes center stage.

The Broader Picture

Between July and September 2023, a total of 17,078 new and returning customers embraced equity release products, primarily lifetime mortgages, to tap into the wealth tied up in their homes. This is a slight uptick from the previous quarter’s 17,028 but still down by a third from 25,519 in the same period last year. The quarter’s activity, with around £700m in lending, echoes the times pre-pandemic — a callback to the first half of 2017.

In essence, while the equity release market isn’t breaking any records just yet, it’s showing signs of dusting itself off and gearing up for better days ahead. With innovation on its side and a cautious eye on the market’s pulse, it appears set to regain its stride.