UK mortgage holders are repaying record amounts of mortgage debt, according to the  Equity Release Council.

But the ERC claims high levels of debt and a lack of pension savings make it increasingly likely that homeowners will need to borrow against the value of their properties in later life to make ends meet.

Regular and one-off capital repayments across the mortgage market have totalled more than £21 billion per quarter since Q4 2022, according to official data, up from £17 billion before the pandemic.

Total UK mortgage debt remained stubbornly high at £1.63 trillion in mid-2023. Despite this, the average home contains equity of £222,526.

Among older homeowners already using lifetime mortgages to release equity from their homes, the ERC data shows a shift in borrowing patterns during H1 2023.

Compared with a year earlier, the average new lump sum or drawdown lifetime mortgage customer withdrew a smaller amount of money and a smaller percentage of their overall housing wealth.

As well as a sign of customer caution, this has also resulted from lower maximum loan-to-values as providers have adjusted to higher interest rates.

Source: Equity Release Council data

The data also shows customers continued to use the flexibility of voluntary penalty-free partial repayments when they can afford to. The average partial repayment was £2,527 in H1 2023.

Data from Moneyfacts shows the uneven effect of rate rises has reduced the gap between lifetime and residential mortgage rates.

Ten years ago the average lifetime mortgage rate was almost three per cent higher than the average fixed rate residential mortgage. For most of 2022, the gap was more than 1.5 per cent compared with the average two-year or five-year fixed rate mortgage.

Over summer 2023, this rate gap fell to less than one per cent versus five-year products and less than 0.5versus two-year products. While the trend reversed slightly during September 2023, lifetime mortgage rates have remained more competitive in relative terms than they were just a year ago, claims the council.

ERC chair David Burrowes says: “People are taking smaller loans and a smaller percentage of their available equity. However, the stark outlook for people’s pension prospects means property wealth will remain a vital part of the equation to avoid a cost-of-retirement crisis.

“While mortgage pricing has jumped across the board, lifetime mortgage rates have weathered the storm better than some residential mortgages. The security and flexibility enshrined in Council standards include the ability to make voluntary partial repayments without the threat of their home being repossessed if repayments become unaffordable.

“Even before the current cycle of rising interest rates, many homeowners were facing the reality of carrying mortgage debt into later life. That is even more likely now, which is why we must double down on our work with industry and regulators to ensure all homeowners understand all their options and make the right informed choices.

“We are completely focused on ensuring that customers receive the right advice at the right time so they can make well-informed decisions, in line with the Consumer Duty. No-one should turn a blind eye to equity release as an option for their later life financial planning, and it’s important they work with Council members to weigh up its practical benefits against all potential alternatives.”