Equity Release Usage Holds Strong in Early 2024 Despite Fewer Newcomers

In the first quarter of 2024, the UK’s equity release market showed a resilient performance with over 14,000 clients opting to unlock value from their properties, according to the latest figures from the Equity Release Council. Specifically, from January to March, a total of 14,216 customers engaged with equity release products. This is a modest increase of 4% compared to the last quarter of 2023, which saw 13,651 users. This growth comes amidst broader concerns over the residential property market and the wider economic environment.

David Burrowes, chair of the Equity Release Council, highlighted the sector’s durability, stating, “The Q1 data highlights the ongoing challenges facing the residential property market as the nation waits to see what happens next with interest rates and the health of the economy.”

A Shift in Customer Dynamics

Despite the overall growth in usage, the sector did see a downturn in the number of new clients. The figures for new customers using equity release products dropped by 11% from the previous quarter to 4,698. This is also a sharp decline of 31% compared to the same period last year.

Burrowes explains the trend: “New customer numbers are lower than last year with feedback from the market suggesting that older homeowners are adopting a more cautious approach to borrowing as there are hopes of interest rate reductions in the near future.”

Popular Choices Among New Customers

However, it wasn’t all signs of decline. The data revealed a strong preference among new customers for drawdown lifetime mortgages, which allow homeowners to receive their funds in stages. This type of mortgage reached its highest quarterly share since late 2021, with 56% of new customers opting for this method in Q1 2024.

Returning Customers Stay Active

The report also highlights returning customers, who continue to utilise their equity release plans actively. About 7,753 existing customers took additional instalments from their reserve facilities, marking a 6% increase from the previous quarter. On average, these returning customers withdrew £12,822 each, which is up by 9% from the end of last year, although still slightly lower than the same quarter in 2023.

Future Outlook

Looking forward, Burrowes remains optimistic about the equity release market’s potential: “As we look to the rest of 2024, we are confident that the green shoots that we are starting to see will germinate and the market will return to growth.”

Lorna Shah, Managing Director at Legal & General Retail Retirement, also commented on the future of equity release: “We expect that equity release will be considered as more of a mainstream product in the future, alongside pensions. Property wealth remains a significant financial asset for many homeowners.”

Shah highlighted the industry’s commitment to adapt and innovate, ensuring that customer needs are met effectively: “As a lender, we always want to support customers and recognise their individual circumstances, which is why we’re always looking to innovate and listen to adviser feedback, to ensure the best outcomes for everyone.”