Number of products on the market are starting to rise
While total lending decreased in the second quarter of the year, the number of new equity release plans started to pick up in May and in June – indicating a recovering market, data from the Equity Release Council (ERC) has shown.
The number of active equity release customers also increased by 2% to 17,028 in Q2, although the number is still 29% lower than the previous year.
Total lending of £664 million, which is 5% lower compared with the previous quarter, made Q2 2023 the quietest period since Q3 in 2016.
The latest ERC equity release market statistics also revealed that more new customers opted for drawdown lifetime mortgages, with the average first release from a new drawdown lifetime mortgage down 35% year-on-year to £59,294.
The number of new plans hit the floor in April, but this started to go up in May and reached the year’s highest in June.
“While 2022 was a record year for the equity release market, the mini budget and resulting economic uncertainty caused significant disruption that we are still seeing the impact of today,” commented Kay Westgarth, sales director at Standard Life Home Finance.
“However, while April was the quietest month in 2023, things have started to pick up and the Equity Release Council figures suggest that June saw the highest level of activity for the year-to-date. This bodes well for the remainder of 2023 as the number of products on the market are starting to rise, and with pressures on LTVs easing, we will be able to support more customers.”
Paul Glynn, chief executive at Air, agreed that the market was showing signs of recovery recently.
“The market mood music has settled into a more comfortable groove, with the number of active customers up by 2% and £664 million unlocked by new and returning customers in Q2 2023,” he said. “While this is down on the records seen last year, this still suggests a market that is successfully weathering the turbulence seen across the residential property sector in the last 12 months.”
“We are seeing green shoots, but they will not grow without considered effort and input from across the industry. There is a lot of work still to do – especially having hit the Consumer Duty deadline.
“Key to this will be to build customer confidence and help them to understand that even in a higher interest rate environment, modern later life lending products can be the right solution to the challenges they are facing.”
Craig Brown, chief executive at Legal & General Home Finance, noted that the ERC data showed customers taking a cautious approach in the current market, with an increase in people turning to drawdown products rather a lump sum.
“The ability to drawdown in stages gives homeowners control,” he said. “We know that lifetime mortgages support a range of needs, including gifting funds to support loved ones. Our most recent internal data also showed that home improvements are still the most popular use of funds, helping those in later life stay in their forever homes.”
Stephen Lowe, group communications director at Just Group, added that for many people, their house is their single most valuable asset, and this underlines the role of equity release in wider financial planning.
“As always, high quality professional advice is essential to helping people decide if equity release is right for them and, if so, to make sure they select the best options for their own particular circumstances,” Lowe stated.
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