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Equity release customers hit record highs in Q3

Nick Cheek
Written By:
Nick Cheek

The equity release sector processed 13,452 new plans in Q3 marking a record number of new borrowers.

This was an 8% rise on the previous quarter and a 32% jump compared to last year, figures from the Equity Release Council (ERC) revealed. 

Along with 9,684 returning customers and 2,419 further advances agreed, the market saw 25,519 borrowers during the period and lent a record £1.71bn. 

Steve Wilkie, executive chairman of equity release specialists Responsible Life, said buoyant property prices gave homeowners a solution to their financial needs in retirement, and this is what drove record levels of activity. 

He added: “The rise in the number of new lifetime mortgage borrowers is perhaps most significant. While the total amount borrowed is affected by inflation and property price growth, the number of people whose best option in later life is equity release continues to rise. 

“This is unlikely to be temporary and it would be a mistake to link these increases solely to the cost-of-living crisis. Lifetime mortgages have been answering the call of other, much larger, crises for years, namely the pension gap, gender pension gap and the difficulties people face in saving enough money for retirement.” 

Compared to the same quarter last year, new customer numbers were up by 34 per cent and lending to all borrowers rose by 49 per cent. 

In addition to the £1.53bn lent in Q1 and £1.60bn in Q2, the equity release sector has generated business totalling £4.84bn so far this year. 

For the year to date, 72,824 equity release borrowers have been served, which is a 36% rise on the same period last year. Total lending has increased by 40%. 

New equity release borrowers

All three months of Q3 saw fairly stable lending, but August was the busiest month with 4,794 new loans agreed. This was compared to 4,515 in July and 4,319 in September and also makes August the busiest month of the year so far. 

New borrowers were relatively split between product choices with 52% opting for lump sum lifetime mortgages and 48% going for drawdowns. 

Average loan sizes for both lump sums and drawdowns were flat on Q2, with a 1% rise for the former and a 3% drop for the latter. 

The ERC said the average lump sum plan of 10% mirrored the rise in inflation, which was 10.1% in September. 

New drawdown borrowers held £48,485 in reserve on average, a 41% surge on last year’s average. 

Returning equity release borrowers 

The number of returning drawdown borrowers rose 4% quarterly to 9,648, and compared to last year this was a 21% increase. 

Returning borrowers accessed £14,444 in funds on average, which was 7% higher than the amount they used in Q2. This was up 17% on the same period last year. 

Some 2,419 borrowers agreed a further advance on existing plans and 1,291 took out lump sums while 1,128 extended drawdown facilities. The ERC suggested borrowers were enabled to do this because of rising house prices keeping loan to values low. 

The average further advance lump sum stood at £32,401 in Q3, a 3% uptick from Q2. Meanwhile, the average drawdown further advance amounted to £18,833 upfront and £8,158 held in reserve. 

David Burrowes, chair of the Equity Release Council, said: “The summer months have seen the equity release market resume its pre-pandemic growth trajectory, with extra protections having been added in the intervening years so all new customers can make voluntary repayments when they can afford to and reduce their overall costs. 

“Council standards mean there are measures in place to protect customers’ existing loans from rising interest rates, as well as ensuring that people can only take out equity release once they have considered it from every angle through detailed financial and legal advice.”