Equity Release Hits New Lending High of £5.58 Billion

22 January 2023

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While the mini-budget in September 2022 saw a slow down in the later life lending market in Q4 2022, strong performance across the rest of the year saw the market hit a record high of £5.58 billion in new lending, new data from the UK’s leading equity release adviser Key Later Life Finance shows.

Plan sales grew by 25% compared with last year to 52,295 – more than 4,300 plans a month – while the value of new equity released increased by 27% to £5.58 billion. Once borrowing by existing customers via drawdown and further advances is included total borrowing hit £6.3 billion.

Although the long-term drivers of the market remain strong, interest rates which increased sharply in Q4 and the reduction in the number of products available saw lending volumes plateau following the September mini-budget.   Traditionally, the strongest quarter of the year, Q4 2022 saw more modest lending amounts (£101,366) than Q3 (£108,180) as customers constrained by lower LTVs were cautious about borrowing.



Customers focus on their finances as interest rates and inflation rises:
Around £3.3 billion of the property wealth released in the year was used to repay unsecured or secured debt as new customers focused on strengthening their finances as rising interest rates and inflation ate into retirement budgets. 

Around half (50%) of the £3.3 billion was used to repay existing mortgages while 38% was used to rebroke existing release plans and 12% to pay off unsecured debts such as credit cards or loans.

Equity release is a multi-used product and when you look at the number of people using equity release for a specific purpose, you find that 31% used it to repay unsecured debts while 27% used it to clear mortgages and 15% remortgaged existing equity release plans. 

While the numbers refinancing equity release products rose from 5,295 in 2021 to 7,252 in 2022 much of this was driven by activity early in the year.  Rate rises since the mini-Budget – average rates were 5.7% at the end of 2022 compared with 3.07% at the end of 2021 – are expected to change the remortgaging market but product flexibility and shorter early redemption periods will continue to support customers.

Average amounts released remain stable:
Year on year, the average amount released last year rose slightly to £106,806 compared with £104,792 in 2021 but that rose as high as £231,694 in London during 2022 and dropped to as low as £60,282 in Northern Ireland.

With customers focusing on debt repayment during the year spending on other uses of equity release fell – around 20% of customers used some or all of their property wealth to gift money to relatives compared with 21% the year before.

The number of customers however using some of their equity release to fund holidays doubled to 14% from 7% in the previous year, as we started to see people return to travel following Covid travel restrictions. However, just 2% of the total proceeds of equity release in 2022 were spent on holidays.

Around two-fifths (39%) of customers used some or all of the proceeds for home and garden improvements compared with 34% in 2021.  Key’s data shows the average age of customers remained stable at 71 with just 6% of customers younger than 60. Around 75% are aged 65-plus.

Will Hale, CEO at Key, said: “While hitting a record £5.58 billion worth of new equity released is a sign of a vibrant market with strong underlying demand, there is no denying that the impact of the mini-budget was felt.  With the current economic uncertainty as well as higher interest rates, lower LTVs and fewer products available, more customers are being cautious about their financial choices. 

“However, we were still able to help people repay more than £3.3 billion worth of both secure and unsecured debt.  This type of refinancing allows people to boost their disposable income during the current cost of living crisis while at the same time carefully managing their borrowing with either ad hoc interest or capital repayments.

“For some downsizing, putting plans on hold or working longer may be the answer to their financial challenges but for many equity release will continue to be the right option for their circumstances – albeit with more focus on managing their borrowing than ever before.

“It is particularly critical in this market that we understand our customers’ needs and recognise their issues. You can only take out equity release with the support of a specialist broker as well as independent legal advice and choosing to start that conversation will help people to find the right option for their individual circumstances now and in the future.”

Across the regions
Key’s Market Monitor, which analyses data reflecting the whole market, shows plan sales and the total value of new equity released rose in every region. London was the only region recording single digit increases in the number of plans taken out and the value of new equity released in the capital rose by 8%.

Yorkshire & The Humber, the West Midlands, Scotland, and the North East all saw increases in the value of new equity released of 40% or more while the North West was the only region to see a 35% rise in plan sales. Yorkshire & The Humber and the West Midlands all recorded increases of 29%.

The continuing strength of the housing market in the South East and London meant those regions accounted for nearly half (46%) of all new equity released in 2022 even though they accounted for less than a third (31%) of all plan sales in the year.

Substantially more plans were sold in the South West and North West than in London while the East and West Midlands saw marginally more plans sold than the capital during the year. The table below shows the breakdown across the country: