Property Drop Issue 21

36 MARKETS
Equity release records broken as
unprecedented Q4 activity sees
2017 lending reach £3.06bn
with annual growth at a 15-year high
• Market sees over 37,000 new customers as total
lending in 2017 reaches £3.06bn
• Q4 2017 marks historic end to year with record
lending of £838m and a milestone of over 10,000
new customers for the first time
• Across 2017, the sector supported almost 67,000
customers seeking to unlock part of their housing
wealth to manage their finances in later life
• Drawdown products remain the most common type
of new product, favoured by 75% of new customers in
Q4 2017
• Fewer customers make additional drawdowns or seek
further advances compared with Q3
A
record quarter for equity release activity in Q4 2017 pushed annual lending
growth in the sector to its highest level since 2002, according to year-end
lending figures¹ from Equity Release Council (The Council). As a result, the
total amount of housing wealth unlocked by over-55 homeowners reached £3.06bn in
2017 - the first time it has exceeded £3bn in a single year.
Lending via equity release plans in Q4 2017 amounted to over £838million, the
highest level on record for any single quarter, as UK homeowners use their housing
wealth to support their finances in later life. This contributed to overall annual lending
growth of 42% when compared to £2.15bn during 2016.
The final three months of 2017 also saw an unprecedented number of new equity
release customers, exceeding 10,000 for the first time in a single quarter (10,327).
This represented a 4% increase from 9,905 in Q3 2017 and almost a quarter (24%)
compared to 8,303 new customers in Q4 2016.
These increases meant the total number of new equity release plans agreed in 2017
was up 34% on 2016 from 27,563 to 37,037: the highest total on record and the
biggest percentage rise since 2003.
Overall, the sector supported almost 67,000 customers during 2017, with
25,794 existing drawdown lifetime mortgage customers returning to dip into agreed
reserves, and 3,867 existing customers agreeing further advances on either lump sum,
drawdown or home reversion plans.
Trends in new equity release plans agreed
Drawdown lifetime mortgages remain the most popular type of product,
representing 75% of new plans agreed in Q4 2017, up from 64% in Q4 2016. Across
2017 as a whole, 71% of new customers opted for drawdown plans, which typically
see smaller amounts of housing equity withdrawn initially compared with lump sum
plans, with an extra amount reserved for future use – thereby limiting the interest
owed as it is only charged on funds as they are withdrawn.
New drawdown customers agreed an average initial instalment of £62,359 in Q4,
a rise of 6% year-on-year from £59,002 in Q4 2016, but down by 4% on Q3 2017
(£64,973). One in four (25%) new customers opted instead for a lump sum lifetime
mortgage in Q4, with the average loan amount of £101,913 relatively stable compared
with Q3 (£100,389) – a rise of 2% – and up 8% year-on-year from £94,330 in Q4 2016.
Across all new customers, the continuing trend towards drawdown products as a way
to release housing equity in smaller instalments meant that – despite the overall growth
of lending activity – average lending per customer was stable year-on-year at £72,217
in Q4 2017 compared with £71,627 in Q4 2016.
Trends in returning drawdown
customers and further advances
The Council’s data shows that the number of returning drawdown customers
dipping into their agreed reserves decreased by 7% in Q4 from 6,849 in Q3 to 6,360.
At the same, the number of existing customers seeking further advances on existing
loans also dropped 16% from 1,138 in Q3 to 961.
The average drawdown instalment taken by returning customers was £10,853 in
Q4 – broadly in line with the average across 2017 (£10,542). Further advances made
up the smallest part of overall market activity, with the average lump sum amount
agreed being £20,171 in Q4, down 7% from £21,757 a year earlier. The average
drawdown further advance was £21,991, up by 4% from £21,066 in Q4 2016.
David Burrowes, Chairman of the Equity Release Council, commented:
“The record-breaking demand for equity release over the past year is testament to
the fact more consumers are changing the way they plan financially for retirement,
and taking a broader range of options into consideration. This is illustrated by the
continued popularity of drawdown products, with many customers viewing equity
release as a reliable source of income in later life.
“Importantly, the evolving mindset of consumers is helped by the flexibility to use
housing wealth for a range of purposes, and the rigorous safeguards and customer
protections in place across the market. Consumers also have more choice than ever
before – driven by the increasing number of providers that has, in turn, increased the
range of product options and helped to push interest rates to new lows.
“Property is, for many people, their largest asset and has the potential to play
an ever-greater role in the future to meet the challenge of ensuring effective later
life funding. I look forward to working with our members and industry, regulators
and government across 2018 to build on what has been a breakthrough year for the
sector.”