British trade body the Equity Release Council (ERC) published its most recent quarterly update this week, showing a market that has returned to growth for the first time in 12 months.
The ERC said that total lending increased by 8% in the third quarter of 2023, with £716m of deals being closed, up from £663m in Q2.
The number of new plans agreed in Q3 was 7,379, up 10% on Q2’s 6,682. Of these, there was a broad split when it comes to product choice: 53% opted for drawdown lifetime mortgages, taking an initial withdrawal up-front with more held in reserve for future use, while 47% of customers opted for a single lump sum. This reversed the trend in Q3 2022 when the equivalent split was 48% drawdown and 52% lump sum.
“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,” said David Burrowes, ERC Chair.
“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,” added Burrowes.
The equity release market in the UK remains suppressed, however, when compared to the past few years. The first three quarters of 2023 account for three of the five lowest quarters for total equity release customers in the past five years; only Q2 2020 and Q1 2021 have delivered fewer customers since the beginning of 2018.