The Equity Release Council market report also showed that competition has driven growth in product numbers, rising 25% from 69 in January 2017 to 86 in January 2018.

Despite the Bank of England base rate rising 0.25% to 0.5% in November, the average product rate fell by 0.23% over the 12 months from January 2017 to 5.14% in January 2018.

Competition also drove product flexibility, with 70% of deals now allowing ad-hoc, penalty-free voluntary or partial repayments of their loans.

David Burrowes, chairman of the Equity Release Council, said: “The council’s aim is for consumers to see equity release as a safe, mainstream and accessible financial solution to their needs in later life and retirement plans.

“With record levels of market growth and more flexible product options than ever before, using housing wealth to boost retirement income is becoming firmly established as a viable and compelling solution to consumer funding needs.”

Popularity

The report showed that consumers are increasingly considering housing wealth among their later life funding options, as housing wealth withdrawals have grown in proportion to flexible pension payments.

For every £1 of savings withdrawn in Q4 2017, the report showed that 56p of equity was released, up from 29p in Q2 2016 and 47p in Q4 2016.

On a year-on-year comparison, housing wealth withdrawals in Q4 2017 grew 25% and by 34% in H2 2017, while flexible pension payments remained flat in H2 2017 and fell 4% in Q4 2017.

Alice Watson, head of product and marketing at Retirement Advantage, said: “One of the most striking developments is the shift towards consumers taking more money out of their properties first and leaving their pensions intact for longer. This is something we have heard about anecdotally – now there is tangible evidence to prove it.

“All the signs are that this trend is likely to continue, which should mean that customer led demand for equity release products will increase further.

“Our expectation is that with more work like this, 2018 will be the year that sees the equity release sector achieve its first billion-pound quarter.”

Outpaced

Lifetime mortgage activity also saw the fastest growth in the overall mortgage market for the second year, with the 34% rise in new customers outpacing growth in first-time buyer, remortgage and homemover activity.

In comparison, remortgage activity growth slowed from 14% to 12% in 2017, homemovers returned to growth with a 5% rise, and the first-time buyer market saw numbers jump 8% for the second year.

The trend is also supported by a ratio perspective.

The report showed that in 2007, there were 88 first-time buyers, remortgagers, homemovers, and new or buy-to-let borrowers for every new lifetime mortgage customer.

That figure has since fallen to 56 in 2012, and 38 in 2017.

Burrowes continued: “Looking forward, we expect the need for new sources of income in retirement will continue to grow as many people will be unable to rely on pressured pension pots.

“It is vital more people understand its possibilities not only to provide income in later life or pay off debts, but also to provide a ‘living inheritance’ for family members and help fund care needs.

“Helping young people get on the housing ladder and paying for social care are at the top of the political agenda, and we look forward to strongly advocating for the role equity release can play in helping to meet these policy challenges.”