Surge in house equity release in UK as over 55s cash in on listing wealth

Equity release lending to UK home owners over the age of 55 totalled £384.3 million in the second quarter of 2015, the largest amount for any quarter since records began.

The latest data from the Equity Release Council show that this surpasses the previous high of £375.4 million reached in the third quarter of 2014 and that the over 55s withdrew £4.2 million of housing wealth every day from April to June.

This uplift comes despite savers gaining greater access to their pension pots under the freedoms launched on 06 April. With house prices rising again, it shows the growing appeal of using listing wealth as an extra source of retirement income in later life, according to the report.
 
Also, record lending in the second quarter meant the total value of equity released in the first six months of 2015 hit £710 million, the largest sum on record for the first half of the year and an 11% increase on the first half of 2014.

There were 5,414 new equity release customers in the second quarter of 2015, an 11% increase on the last quarter, pushing the total number of new customers past 10,000 for the first six months of 2015.
 
The value of lending, via lump sum lifetime mortgages, increased by 10% year on year in the first half of 2015 to reach £285.3 million, the highest total for lump sum activity in the first half of any year since the first half of 2007 when the value hit £355.9 million.

However, the value of lending via drawdown lifetime mortgages surpassed this rate of growth, rising 12% year on year from £379.2 million in the first half of 2014) to £423.5 million in the first half of 2015.

The data shows it also rose faster from the first to second quarter, at 21% compared with 14% for lump sum products. The Council says this was as customers took advantage of the flexibility to withdraw their housing wealth in regular instalments rather than as a one off amount.

Home reversion plans account for less than 1% of the overall equity release market, yet these too saw an increase of 18% in lending from £534,765 in the first quarter of 2015 to £632,647 in the second quarter.
 
‘The last three months have been a landmark period for UK retirees and those approaching retirement, and equity release activity continues to grow amid a sea of change. There is no doubt the pension freedoms have created more options for people to consider, but the appeal of tapping into housing wealth is on the rise as older consumers seek to make use of all the assets at their disposal,’ said Nigel Waterson, chairman of the Equity Release Council.

‘Doom and gloom often surrounds discussions on retirement income, but while contributions to pension pots remain low, an entire generation of home owners have been paying into listing their whole lives making it an asset that can transform their financial options beyond the age of 55. Anyone seeking advice on how to plan their retirement should consider their listing as a valuable source of wealth,’ he explained.

‘With the mainstream mortgage market grappling with issues of so-called age discrimination in the wake of the Mortgage Market Review (MMR), it is time to build bridges and encourage more focus on equity release as a source of finance in retirement. New providers promise to bring more innovation to the equity release arena this year and will help to satisfy the rising demand,’ he added.

Indeed, the Mortgage Market Review has stopped many older people from accessing a traditional mortgage, according to Alex Edmans, head of retirement at Saga. ‘This and the fact that many people are now coming to the end of their interest only mortgage term without a full repayment plan, has meant that more are turning to equity release as a viable solution to borrowing in retirement. Indeed Saga has seen an increase in the use of equity release to clear a mortgage,’ he explained.

‘Now is a good time to consider equity release, as interest rates are at their lowest ever levels, listing prices are increasing and loan to values have recently increased, meaning people are able to access more of the wealth tied up in their listing,’ he added.

The equity release sector is likely to continue with growth, according to Helen Davies, head of implementation at financial product provider Partnership. ‘Rising house prices combined with lack of pension provision and older consumers finding it increasingly tougher to borrow have created a perfect storm which is likely to continue to stimulate growth well into the future,’ she said.

‘While equity release should never replace adequate pension provision, considering how you can use your housing wealth in retirement should be part of people’s later life planning.  Whether it is used to repay a mortgage, to fund care or simply improve someone’s standard of living, it can make a big difference to people’s quality of life,’ she concluded.

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Source: Property News Spain