Equity release lending rises 17%

The average customer released nearly £68,500 – an increase of £3,500 on the same period last year – highlighting pensioners’ confidence in using property wealth for retirement planning. The findings reveal the wide regional variances ranging from average releases in the North West of over £53,000 to over £142,000 in London.
 
Total property wealth released in the six months rose 17% to £753 million from £641 million and total number of plans climbed 10% to 11,007 from 10,013.
 
The money is being used to boost standards of living in retirement with 58% of customers using some or all of their cash to improve their home or garden while 28% have used their property wealth to pay for holidays.
 
However mortgage debt – including interest-only loans - is emerging as a major issue with 23% of customers paying off home loans with some or all of the money, compared to 20% for the same period of 2014. Around 29% also used the cash to pay off credit cards or loans.
 
Equity release customers are getting older - the average age rose to 71 in 2015, from 69 previously – but they are also wealthier thanks to house price rises with average property values rising 9% to £271,248 from £249,108.

Dean Mirfin, technical director at Key Retirement, said:   

“Property wealth is making a massive contribution to retirement planning and the equity release market is growing rapidly in response with double-digit growth.
 
“The average amounts released at £68,500 are more than 50% bigger than the average pension pot and are also tax-free highlighting the advantages of using property wealth in retirement.
 
“Cuts in pension allowances and contribution levels plus the review of pension tax treatment underlines that property investments are major assets which should be considered as part of anyone’s retirement planning.”
 
Across the country eight out of 12 regions saw growth in the value of property wealth released with the North East recording a 50% rise, the South East 35% and London a 30% increase. The value released dropped 13% in the North West. Eight out of 12 regions recorded rises in plan sales with three virtually unchanged. London saw a 28% rise and the North East a 31% increase.

Around 63% of all sales were drawdown plans, including enhanced drawdown which offers enhanced terms to people with health or lifestyle conditions, compared with 37% from lump sum single advance lifetime mortgages including enhanced products.

Andrea Rozario, Chief Corporate Officer at Bower Retirement Services said:

“Interest-only mortgages are a major issue for advisers and increasingly they are seeing equity release plans as a solution for clients who have the assets but not the cash to clear a major debt.
 
“However it is not the only factor driving equity release sales as the market continues to expand on the back of growing confidence in using property wealth as a major part of retirement planning.”