16% fewer people using equity release for mortgage repayments

The number of people using equity release funds to repay their mortgages has fallen by 16%, reducing from 40% in H1 2022 to 24% in H1 2023, according to the latest data from Mortgage Advice Bureau Later Life’s Market Monitor Report.

MAB says the reduction is due to lenders restricting LTVs to reflect housing market conditions, leaving some customers unable to access the financing they need.

Remortgaging of existing equity release products has also fallen by 5%, dropping from 19% in H1 2022 to 14%. Once again, the lower LTVs available and higher interest rates may have discouraged some customers from refinancing their existing equity release plans.

Shift in spending priorities

The research outlined suggests that the key priorities for equity release customers in H1 2023 lie in supporting their families (20%) and improving their homes to make them more appropriate for older age (45%).

The proportion of equity release used for gifting has increased, rising from 12% in H1 2022 to 16%. Meanwhile, spending on holidays only accounts for 2% of the total amount of equity released.

Notably, the proportion of people using equity release to repay unsecured debt has fallen. Just 5% of the proceeds are used for this purpose - a 4% drop from the previous year’s 9%.

One noteworthy aspect of equity release usage is its role in financing home improvements. While 45% of equity release plans are partially or fully used for home improvements, the actual expenditure on such projects accounts for a smaller portion, amounting to 12%, or £131 million.

In H1 2023, the average amount released for home or garden renovations was £14,082, reflecting a decline from H1 2022 (£17,978) and H1 2021 (£16,907) due to lower LTVs, higher interest rates, and cautious borrowing attitudes.

In addition, surveyors often identify necessary repairs during property assessments as part of the equity release application process. Lenders may choose to retain a portion of the equity to ensure these repairs are undertaken.

Steve Humphries, proposition director for mortgages at Mortgage Advice Bureau Later Life, commented: "Like other segments of the residential property market, the later life lending market faced challenges at the beginning of the year. Nevertheless, all signs point to a stronger second half of the year compared to the first.

“As confidence gradually improves and people realise that any potential house price corrections aren’t as severe as initially predicted, customers will begin to reconsider their options for later life lending, and how they choose to use equity release.

“The industry is poised to embrace this shift, and I have confidence that we’ll witness a surge in product innovation. This will enable advisers to serve a more diverse range of customers and ensure that the remaining half of 2023 resembles previous years and - most importantly - a return to a healthier market.”