Retired homeowners are releasing equity from their homes at record rates, according to quarterly figures released by Key Retirement.
Their Q3 Market Monitor shows that new customers released £749m through equity release scheme in the three months to 1 October, an 18 per cent on the same period last year.
At the same time the number of plan sales climbed by 26 per cent, to 10,477.
Some of the strongest areas of growth were in Wales, where sales of equity release plans increased by 51 per cent year-on-year. There was also strong growth in East Anglia, with plan sales increasing by 46 per cent year-on-year.
The average retired homeowners released £71,500 through these equity release schemes, on a homes worth an average of £325,000.
In London pensioners released an average of £133,000 from houses worth £655,000. In the South East the average house price was more than £400,000, with pensioners cashing in just over £84,000.
More than one in five (22 per cent) customers used this money to pay off outstanding mortgage debt, while 30 per cent used the cash to clear debts and 36 per cent used it to go on holiday.
Over a quarter (26 per cent) used the money to help family and friends, up from 19 per cent in the same quarter a year ago.
However, the most common reason for releasing cash was to get their home ‘retirement ready’. Almost two thirds (64 per cent) used the wealth for home and garden improvements.
This Key Retirement research follows on from figures released by Equity Release Council figures on total lending, published in November. Unlike the ERC figures, this data looks only at equity release plans taken out by new customers.
Key Retirement’s chief product officer Dean Mirfin says: “The new record for the third quarter means sales for the first nine months of the year have already nearly matched the total for all of 2016.”
Drawdown plans, which enable customers to release money as they need it, continue to be the most popular equity release options, accounting for 64 per cent of sales. Lump sum plans account for 36 per cent of sales, unchanged from a year ago.
There has though been though an increase in sales of enhanced drawdown and enhanced lump sum mortgages for customers with lifestyle conditions. These accounted for 33 per cent of sales in the past three months, compared to just 19 per cent a year ago.
Mirfin added: “The growth in sales of enhanced equity release demonstrates the importance of quality advice in ensuring that customers receive the maximum value of lending terms from their property wealth.
“Lump sum plans are maintaining their share of the market as they increasingly tend to be more appropriate for younger retirees looking to repay outstanding mortgages.”