Equity release hits record levels
The equity release market is back above pre-recession levels as lending rocketed to £1.38bn in 2014, figures published by the Equity Release Council reveal.
Annual lending is the highest since records began in 1992, surpassing the market’s previous high in 2007 by 14% when it reached £1.21bn.
The Council said its latest annual figures demonstrated the growing appeal of equity release among older homeowners as the market witnessed year-on-year growth of 29%.
With the pension reforms due to come into force from 6 April, Stonehaven marketing manager Alice Watson said further growth in the market was “anticipated”. She highlighted the need for more regulated advice in the industry to meet the growing appetite among consumers.
“There are still some constraints in the market, particularly around the low numbers of advisers who are qualified to give equity release advice – and we need a bigger commitment from the industry to support the product’s growth,” Watson said.
“With April 2015 pension reforms on the horizon, more advisers will need to become qualified in order to give holistic retirement planning advice. Hopefully these reforms while challenging will prove to be the catalyst for more advisers to undertake specialist qualifications.”
Bower Retirement Services CEO Geoff Charles added: “We need responsible, expert advisers to guide the older generation through the options available and set them on the right financial course and equity release is becoming a useful path for many.”
The value of equity release lending totalled £365.7m in Q4 2014, compared to £310.2m in Q4 2013. Total lending reaching a total of £741m for the second half of 2014, the largest amount in any half year since the Council began recording this in 2002.
Record numbers of customers joined the equity release market in 2014 with 5,712 over-55s releasing equity from their homes in the last three months of 2014. Customer numbers have grown for four consecutive years since the recession.
The data also showed the increasing popularity of drawdown products among equity release customers with two-thirds (66%) opting for these products, compared to just 25% in 2006. Over a third of new plans (34%) opted for lump sum products, with home reversion accounted for less than 1%.
Partnership head of implementation Helen Davies said: “Two different sets of customers appear to be developing – those who use a lump sum to clear outstanding debts at the start of their retirement and those who use drawdown to boost their income. This clearly highlights the different ways that equity release can support the over-50s and strongly support the case for future market development.”