Equity release lending volumes hit £2.1bn in 2016, up 26 per cent on 2015, according to Key Retirement.
The total number of equity release plans rose 17 per cent in the period, from 23,747 to 27,666, according to the Key Retirement UK Equity Release Market Monitor.
Key estimates that lending will rise 28 per cent in 2017 to £2.75bn and that the number of new plans will rise 19 per cent to 33,000.
Key Retirement found that home and garden improvements are still the main reason consumers choose equity release, with 63 per cent of customers ranking this as their motivation in 2016.
However, equity release is increasingly being driven by customers wanting to clear mortgage debt.
Key found that 22 per cent of customers chose equity release for this reason, up 6 per cent in five years.
This represents the single largest shift out of all the popular reasons to choose a lifetime mortgage, including going on holiday and helping with regular bills.
Key Retirement technical director Dean Mirfin says that maturing interest-only mortgages with no repayment strategy will cause a boom in equity release.
He says: “Certainly equity release will become more important for interest only payment. We are seeing that already.”
Mirfin says around 40,000 interest-only mortgages will mature every year for the next five years, and the number will then increase.
Drawdown was the most popular plan in 2016, accounting for 62 per cent of all new plans.
The average age for those releasing equity was 72, unchanged from 2015.
However, Mirfin says the 65-69 age bracket will increasingly turn to equity release and become the main borrowing bracket.
Key Retirement’s figures include equity release figures from firms like small building societies, and so are typically higher than figures from bodies such as the Equity Release Council.