Legal & General has announced plans to enter the equity release market by purchasing existing provider Newlife.

The £5m deal will see Legal & General become the sole funder of Newlife’s equity release mortgages.

The purchase is expected to complete in the first half of this year, subject to regulatory approval.

Newlife has provided lifetime mortgages since its launch in 2003, allowing borrowers to release cash from their property while continuing to live in the house.

Bernie Hickman, managing director of Legal & General’s individual retirement business, said: “We are delighted to announce our acquisition of Newlife and our entry into the lifetime mortgage market. Over 60s in the UK have nearly £1.3 trillion in housing equity and we believe lifetime mortgages will become an increasingly popular way for many people to supplement their retirement income.

“Legal & General’s acquisition of Newlife allows us to participate fully in this market, which we believe has huge potential. With close to £40bn of annuity assets**, we have considerable capacity to provide future funding in this growing market.”

Nigel Waterson, chairman of the Equity Release Council, said more high street names were eyeing up the market.

“We look forward to welcoming Legal & General to the equity release market following its acquisition of Newlife,” he said.

“It is no secret that some major high street names have been considering a move into equity release, which will give the sector an additional boost following a record £1.4bn of lending activity last year.”