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Equity release lending hits £1.6bn

monopoly house with pound coins

According to the Equity Release Council’s last report, the second half of 2015 marked the strongest growth in lending activity since 2008.

The Spring Market Report revealed that:

  • Housing wealth released by homeowners in 2015 reached a record £1.61billion
  • The average lump sum mortgage withdrawal increased to £81,324 in the second half of last year, up from £77,494 in the first half of 2015
  • Lifetime mortgage customers aged 55 – 64 represented 17.5% of all customers in H1 2015, but by H2 2015 they represented 21.2% of all customers
  • The average age of an equity release customer is now 69.8
  • Most 55-64s opt for lump sums while four in five choose drawdown beyond 75

More customers are choosing to unlock cash from their homes, and they are releasing more of it, according to the figures. The second half of 2015 saw a 26 per cent rise in the value of lending compared with the first half (from £710m to £898m); the biggest half-year growth rate of the post-2008 era.

It is believed that the consistent increases in house prices across the country has led to the continuing growth in popularity of equity release, as thousands of over 55s watch their biggest asset, their home, grow in value. Figures show the average house price of customers reached £294,49 in the second half of 2015, up from £283,806 in the first half of the year.

Growth across the ages

It also appears that, as the repercussions of the recent Mortgage Market Review’s tougher lending criteria continue to alienate older borrowers, more customers in the 55-64 age bracket are turning to equity release.

In fact, customers aged 55 – 64 represented 21.2% of new plans agreed by customers in the second half of last year, up from 20.0% a year earlier.
While 65-74 remains the most common age for taking out an equity release plan, there has also been a notable rise in plans taken out by older customers. Those aged 85+ accounted for 5.9% of new plans in the second half of 2015, almost twice the 3.0% share seen a year earlier.
Housing wealth is clearly assisting those much later in retirement, as homeowners use their equity to meet one-off costs such as home repairs, fund homecare needs or simply boost their retirement income.

Interest-only shortfalls

For the 55 – 64 age group, homeowners are tapping into their property wealth for a number of reasons, but the most critical may be to pay off existing mortgages, especially interest-only shortfalls.

The amount left to repay is often substantial – around half of those without a strategy to repay will have a shortfall of over £50,000. For those living with the stress of needing to imminently meet these shortfalls, the resulting financial and emotional effects of a lifetime mortgage can be life-changing.

Andrea Rozario, Chief Corporate Officer of Bower said:

“Many clients who we serve at Bower are thrilled that there is a product on the market that can allow them to meet their repayment, whilst also ensuring that no immediate interest repayments are needed.

“Other than the products in the equity release stable, there is no other product on the market that can allow people to do this.”

Equity release is not right for everybody of course, so Bower recommends anyone considering equity release to speak to an independent specialist in retirement lending before making a decision.

Your Bower specialist will take the time to explain everything thoroughly, including how equity release will reduce the value of your estate and how it may affect your entitlement to some state benefits. Speak to us today to arrange your free, no-obligation initial consultation.