Equity release activity dips as market adjusts to higher interest rate environment: ERC

The number of new and returning equity release customers dipped to 16,691 in Q1, down 19% from Q4 2022 and down 29% compared to a year earlier, according to the latest figures from the Equity Release Council.

A total of £699m of property wealth was unlocked by new and returning customers between January and March. This was the lowest quarterly total since Q2 2020 when withdrawals were limited to £698m as a result of Covid-19 lockdown restrictions. Total lending of £699m made Q1 2023 the quietest by this measure since Q2 2020.

The number of new plans agreed in Q1 was down by 39% compared the final quarter of 2022 and down by 44% compared with Q1 2022.

February was the quietest month of Q1, with the number of new plans picking up in March, as product pricing continued to recover from its peak in November 2022.

The higher interest rate environment saw customers reduce the amount they borrowed compared with recent trends. At £61,785, the average first withdrawal from a new drawdown plan was down 34% year-on-year to the smallest amount seen in almost six years since Q2 2017, despite house prices having risen 30% during this period.

New customers were close to evenly split when it comes to product choice: 51% opted for drawdown lifetime mortgages, taking an initial amount up-front with more held in reserve for future use, while 49% of customers opted for a single, larger lump sum.

David Burrowes, chair of the Equity Release Council, commented: “People have had to adjust to the realities of a higher interest-rate environment in many aspects of their personal finances. These figures show the equity release market has been no exception, although there are early signs, with decreasing rates and returning appetite, that a recovery is underway.

“Suitability and timing are everything when it comes to deciding to release equity. For some, it has made sense to continue with their plans. Other would-be customers have evidently been biding their time to see what interest rates do next.

“Homeowners with a present need have proceeded cautiously with average loan sizes at their lowest since 2017 in some cases, despite a 30% rise in house prices during that time. Anyone who unlocks money from their homes can do so safe in the knowledge that recent production innovations can work in their favour by giving them options to keep costs under control."