The market grew despite a dip in activity during the last quarter
Despite a slowdown in the fourth quarter, the equity release market saw record activity in 2022 with 93,421 new and returning customers choosing to access their property wealth via equity release products.
Market statistics published by the Equity Release Council (ERC) on Tuesday revealed that the total number of these customers grew by 23% year-on-year – the highest rate of growth since 2018.
Total annual lending reached £6.2 billion, a new high following the 30th year of voluntary regulation being introduced, up 29% from £4.8 billion in 2021 and double the £3.06 billion recorded just five years ago.
The trade body also reported that 49,285 homeowners took out new plans, up 20% on 2021, with all new plans since March 28, 2022, guaranteeing customers the right to make voluntary penalty-free partial repayments to reduce interest costs.
The market grew despite a dip in activity during the last quarter of 2022 following September’s mini budget that prompted rate rises, reduced product availability, and shook consumer confidence, with December regarded as the quietest month since before the COVID-19 pandemic.
In Q4, the number of new and returning equity release customers reached 20,597, down from the record Q3 2022 figure of 25,591 but a modest 3% annual increase from 19,975 in Q4 2021. Customers borrowed £1.36 billion of property wealth between October and December, marginally higher than £1.34 billion one year earlier, but down 20% from £1.71 billion recorded between July and September.
“We saw a glimpse of the equity release market’s potential in 2022 as it returned to its previous growth path with a growing customer base making use of improved products and added protections,” David Burrowes, chairman of the Equity Release Council, commented. “In a climate where retirement incomes have to stretch further for longer, property wealth is as important to many people’s financial wellbeing as their pension.
“The unmet needs of the UK’s ageing population have seen the equity release market double in size since 2017, channelling decades of experience in helping older homeowners to gain financial freedom. Today’s equity release customers are more in control of their costs than ever before, with the right to make voluntary penalty-free partial repayments and the option of fixed early repayment charges which reduce to 0% over time.”
Craig Brown, chief executive at Legal & General Home Finance, remarked that it was great that equity release market growth returned to pre-pandemic levels last year, with over-55s increasingly using property wealth for their own needs or to support loved ones.
“Research from our Equity Economy report last year, showed 13% of equity release customers surveyed accessed their property wealth to finance energy efficiency improvements,” Brown added.
“We understand that customers can be cautious when looking at their property as part of their financial planning and, in fact, it might not be the right route for them. However, the equity release market has some of the most stringent safeguards in place, with providers and advisers adhering to high industry standards.”
Alice Watson, head of marketing communications at Canada Life UK, noted that while 2022 as a whole was a record-breaking year for the equity release market, the reverberations of the former chancellor’s mini budget could not be ignored.
“In the final quarter of last year, we witnessed a significant dip in market activity attributed to the turmoil created,” Watson said. “Looking ahead, it’s clear that there is a real opportunity for property wealth to form part of holistic retirement planning to help meet the needs of an ageing population.
“In today’s challenging environment, equity release can provide certainty and flexibility for those looking to unlock cash from their homes to meet their evolving needs. However, releasing equity is a lifelong financial decision and not to be taken lightly, so it is essential that people seek financial advice and talk through their options with loved ones before making any financial commitments.”
The Equity Release Council’s market statistics are compiled from ERC member activity, including all national providers in the equity release market. The latest edition was produced using data from customer activity during the fourth quarter of 2022.
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