Equity release lending reaches record levels in Q1

24th April 2017
"The early months of 2017 have bucked the seasonal trend of a slower start to the year, with both new customer numbers and total lending reaching record levels"

The latest report and analysis from the Equity Release Council has revealed record annual growth in both lending and new customer volumes in Q1 following a record breaking 2016.

According to the report, a total of 8,351 new equity release plans were agreed in Q1 2017: 61% higher than the 5,175 recorded in Q1 2016. Meanwhile, the total value of equity release lending in Q1 reached £697 million, up by 77% from £394 million in Q1 2016. In both cases, the year-on-year growth is the highest seen in any quarter since quarterly records began in 2002.

This is also the first time since 2003 that the equity release sector has been busier in the first quarter of a new year than the final quarter of the previous year. Between Q4 2015 and Q1 2016, the number of new equity release plans agreed fell 19% while the total value of lending fell 11%. In contrast, the number of new plans increased 1% (from 8,303) from Q4 2016 to Q1 2017 while the total value of lending by increased 4% (from £670 million).

Comparing back over two years to Q1 2015 – the last quarter before the ‘pension freedoms’ were introduced – the number of new plans agreed in Q1 2017 was 71% higher while the total amount of Q1 lending has more than doubled from £326 million (an increase of 113%).

In terms of product split, drawdown lifetime mortgages remain the most popular choice of new plan among equity release customers. However, lump sum lifetime mortgages saw the highest rate of annual growth in both new customer numbers and the total value of lending in Q1 2017.

Compared with Q1 2016, the volume of new lump sum plans agreed increased by 94% from 1,719 to 3,337. This meant that lump sum plans accounted for 40% of all new plans agreed across the quarter – the highest market share since Q3 2009. The total value of lump sum lending – including further advances – also grew by 110% from £153 million to £321 million.

In addition to the 8,351 new plans agreed, Q1 2017 also saw 6,019 existing customers with drawdown lifetime mortgages – which allow multiple withdrawals of housing wealth up to an agreed amount over a period of time – tap into their unused reserved facilities. This is the first time that aggregated data has been collected and published for this activity. A further 766 existing customers across all product types agreed further advances on their current plans.

Nigel Waterson, Chairman of the Equity Release Council, commented: “The early months of 2017 have bucked the seasonal trend of a slower start to the year, with both new customer numbers and total lending reaching record levels. Alongside this, the annual rate of growth is also the fastest that the sector has seen, as equity release continues its progress to becoming a mainstream retirement product among older homeowners.

Much of this activity is due to increasing supply as well as growing demand. The past year has continued the trend of new providers, products and flexibilities coming onto the market. Regulatory changes, such as the common-sense relaxation of affordability rules for interest-served products, have also provided more scope for the sector to meet burgeoning demand."

Steve Ellis, Managing Director, Legal & General Home Finance, said: “This isn't just another quarter of strong growth for the lifetime mortgage market – it is a period of unprecedented activity. Not only has there been a significant increase in the lending figures, but there was also a staggering 61% increase in the number of equity release plans agreed compared to last year. This is a clear indication that record numbers of people are now seeing their home as part of the mainstream retirement solution."

Stuart Wilson, Chanel Marketing Director at more 2 life, added: “While these results are of course welcomed, they are not a huge surprise. more 2 life has been saying for some time now that this industry is set for huge and rapid growth and the figures out today reflect this. Last year we predicted the market would reach the £2bn mark in 2016, and the early signs are that we are on track for another record year."

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