Equity Release begins long haul back to normal market conditions

The equity release market has seen growth for the first time in 12 months with quarterly increases in both new customers and total lending.

Total lending hit £716m in Q3, loaned to 7,379 new customers and 8,466 returning drawdown customers. 

The average initial drawdown is £63,238 while the average lump sum is £94,806; however, both lump sums and initial drawdowns are down about a third on an annual basis.

The market remains suppressed at 2017 levels with new customers down 45 per cent and total lending down 58 per cent on an annual basis.

David Burrowes, chair of the Equity Release Council, says: “These figures suggest the process of building back is slowly underway in the equity release market, after a period where higher interest rates have prompted consumers and industry to reach for the ‘reset’ button. With customers starting to venture back, the market is at the start of a gradual but fragile road to recovery, with pent-up demand likely to emerge in future years as the interest rate cycle begins to turn again.

“While the clock has been wound back on lending activity and loan sizes, product innovation has increased the flexibility of lifetime mortgages. New customers of plans that meet our high consumer standards can use voluntary repayments to keep their costs in check while existing customers are free to take extra instalments of money as they need it, safe in the knowledge their previous borrowing is fully insulated from rate rises.

“Looking ahead, we must be wholly committed as an industry to putting equity release in its proper context as one of a range of later life lending options and putting property wealth in its proper context at the heart of every retirement planning conversation.”

In terms of overall activity, a total of 17,078 new and returning customers used equity release products – primarily lifetime mortgages – between July and September 2023 to unlock wealth from their homes.

The number of active customers this quarter was very slightly up from 17,028 in Q2, although it remained down 33 per cent year-on-year from 25,519 in Q3 2022.

A total of £716m was unlocked by new and returning customers between July and September. This represents an increase of eight per cent on the previous quarter (£663m) and meant Q3 was the busiest quarter of 2023 so far for lending.

Currently lending activity of around £700m per quarter is broadly in line with levels last seen during the first half of 2017, excluding the first lockdown during the Covid-19 pandemic

Equity release customers numbers, by type of customer, Q1 2018 to Q3 2023

Number of new equity release plans agreed per month, July 2020 to September 2023  ​

Source: Equity Release Council