Total lending and number of customers fell in Q1
The number of new and returning equity release customers active between January and March this year dropped to 16,691, data from the Equity Release Council (ERC) has shown.
This figure represents a 19% decline from the 20,597 total number of equity release customers recorded in Q4 2022 and a 29% drop from the 23,395 posted a year earlier. This was the lowest in terms of equity release customer numbers since Q1 2021.
Total lending of £699 million made Q1 2023 the quietest by this measure since Q2 2020, when withdrawals were limited to £698 million as a result of the COVID-19 lockdown restrictions.
The latest ERC equity release market statistics also revealed that new customers reduced their loan sizes in Q1, with the average first release from a new drawdown lifetime mortgage down 34% year-on-year to £61,785, the smallest seen in almost six years.
The number of new plans agreed for Q1 2023 was 6,766, down by 39% from 11,174 in the final quarter of 2022 and down by 44% compared with Q1 2022 when 12,174 new plans were taken out.
New customer numbers fell to 2,026 in February, down 14% from January, before recovering to 2,384 in March as product availability and pricing continued to recover from the mini budget.
“People have had to adjust to the realities of a higher interest-rate environment in many aspects of their personal finances,” commented David Burrowes (pictured), chair of the Equity Release Council. “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.
Burrowes also noted that 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,” he said. “Every product that meets council standards allows people to make penalty-free partial loan repayments, reducing the build-up of interest.
“In addition, almost every product now offers early repayment charges that reduce to zero, making switching plans more practical in future if interest rates fall. Seeking advice from a council member is essential to weigh up short and long-term considerations so that customers understand all their options and alternatives when making a plan.”
Mark Gregory, founder and chief executive at Equity Release Supermarket, said the past six months had proved to be a difficult period for most within the industry due to the ever-changing landscape and volatile lending environment.
“Following a slowdown in the market across the board throughout Q4 of last year, we are now witnessing renewed growth, which in part is due the provision of choice and control now available to consumers within the market,” Gregory stated.
“Given that equity release as a product now also provides enhanced flexibility and versatility, it is gaining wider attention and increasing in popularity.”
Stephen Lowe, group communications director at retirement specialist Just Group, explained that the latest ERC figures showed the real impact of interest rate policy, which has seen the Bank of England hike the official bank rate from under 1% a year ago to 4.25% today.
“Against such a backdrop of uncertainty, it was not surprising to see demand from some potential customers reduce,” he commented. “Demand from customers with core needs remains strong and the structural drivers of consumer demand over the medium term remain intact.
“It is essential customers understand their options and use equity release when it is most suitable for their particular circumstances. Today’s lifetime mortgages offer flexibility and a wide range of features, such as accessing medically underwritten rates to using drawdown arrangements to interest-servicing – all of which can reduce borrowing costs.”
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