"2016 was a hugely significant year for the equity release sector"
New Equity Release Council data has highlighted that, in terms of customer numbers, lifetime mortgages became the fastest growing segment of the mortgage market during 2016.
According to the report, the volume of lifetime mortgage customers saw a 22% rise last year, surpassing buy-to-let remortgaging at 16%. The growth rate of equity release lending between 2015 and 2016 was 34%: more than double the 16% seen from 2014 to 2015.
Other segments of the mortgage market had a mixed year in 2016: while remortgaging numbers grew 14% and first-time buyer numbers by 8%, the volume of home mover mortgages fell by 2% while buy-to-let purchase mortgages fell 13% from 2015.
In 2006, there was one new lifetime mortgage agreed for every 27 home mover mortgages and 43 remortgages. By 2016 this had reduced to one lifetime mortgage every 13 home movers and 14 remortgages respectively.
Equity release products saw the most significant fall in rates across all mainstream personal borrowing options. Over the year to January 2017, average equity release rates experienced a decrease of 75bps from 6.20% in January 2016.
At the same time, the number of products available to customers has continued to rise along with the flexibilities these offer, including downsizing protection, capped variable interest rates, and options to make monthly interest payments or annual capital repayments without incurring a charge.
Drawdown mortgage products continued to be the most popular type of equity release plan in 2016, with 65% of new customers opting for drawdown compared to 35% opting for lump sum mortgages. However, over the course of the year the proportion of lump sum customers increased slightly, from 33% in H1 to 37% in H2 (drawdown fell from 67% to 63% as a result).
The proportion of older equity release customers is also rising. Between H1 2016 and H2, the proportion aged 75-84 increased from 19.4% to 20.2%, while the proportion aged 85 and above increased from 3.0% to 4.1%. The proportion of customers aged 55-64 remained relatively stable, rising from 21.2% in H1 to 21.3% in H2 2016.
Nigel Waterson, Chairman of The Equity Release Council, commented: “2016 was a hugely significant year for the equity release sector. The value of lending has nearly tripled in the five years from 2011 to surpass the £2bn mark, and we also celebrated the 25th anniversary of the industry Standards which have been fundamental to establishing a safe and reliable market for consumers.
The sector is becoming increasingly mainstream amid growing appetite from older homeowners, reflected by the fact that lifetime products were the fastest growing segment of the mortgage market last year. Older homeowners are increasingly realising that there are a number of potential uses for their housing wealth beyond supplementing their retirement income, including re-investing in their homes and helping younger family members by providing a living inheritance.
Greater flexibilities and growing competition mean the equity release product range continues to evolve, and The Council and its growing membership remain steadfastly committed to ensuring best practice in advice and product delivery to ensure good outcomes for consumers.”