Older homeowners withdraw £10m in equity release each day: ERC

Equity-release-house-home-700.jpgEquity release lending continues to grow at an exponential rate, with almost £10m of housing wealth being withdrawn a day, according to the latest quarterly figures from the Equity Release Council.

This figure has more than doubled in the space of two years. In 2016 the homeowners withdrew around £4.3m of housing wealth a day over the first quarter of the year.

Over the first three months of this year homeowners aged 55 and over, released £870m from the values of their properties, according to the Equity Release Council’s Spring Market Report.

This is a 25 per cent increase on lending in the same period last year, and an increase of 120 per cent when compared to the first quarter of 2016.

The number of homeowners opting to take out an equity release product has also increased, rising by 22 per cent year-on-year and a 97 per cent increase over two years.

The ERC report shows that there were 10,195 new customers between January and March this year, compared to 5,175 in the first three months of 2016.

This report shows that the average initial instalment on a drawdown lifetime mortgage was £64,785. This is a 4 per cent increase on the last three months of 2017, but a 5 per cent decrease on the same period last year.

The Equity Release Council says increased demand has led to an increase in product options available to consumers. In January 2017 there were 69 product options available,  rising to 86 by January 2018.

Over two-thirds of the product options available, now offer consumers the choice to make ad-hoc penalty-free partial repayments of this loan.

Drawdown lifetime mortgage continue to be the most popular produce choice – with two in three customers opting for this arrangement.

Drawdown products typically see smaller amounts of housing equity withdrawn initially compared with lump sum plans, although there is an additional amount reserved for future use. Interest is only charged on these funds as they are drawn down.  

The average size amount withdraw via a lump sum lifetime mortgage was £96,483, down 5 per cent from the previous quarter but broadly consistent with the average amount withdrawn the previous year.  

Meanwhile, the report shows the number of existing drawdown customers returning to make withdrawals from their agreed reserves grew by 26 per cent year-on-year.

Returning customers made average withdrawals of £11,453, with returning drawdowns accounting for 10 per cent (£89m) of lending activity overall.

The Equity Release Council said that these figures show that the sector could be in line for another record year, potentially delivering  as much as £4bn of retirement funding to older homeowners.

The total lending for the first three months of this year has surpassed the previous record for lending in one quarter. This was recorded in the last three months of 2017, helping push the 2017 total past £3bn for the first time.

Equity Release Council chairman David Burrowers says: “It is clear that equity release has become an increasingly useful and flexible financial planning tool for older homeowners.

“Equity release provides financial help for consumers in a wide range of circumstances, including to those looking to pay off interest-only mortgages, and others wanting to make home improvements or adaptations, and fund social care needs in the comfort of their own homes.

“It can also help financial issues across generations by providing a valuable mechanism to provide a ‘living inheritance’.”

 

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