New equity release lending hit £1.5bn in the third quarter with the average customer borrowing more than £114,000, according to adviser Key Later Life Finance.
Plan sales lifted by 29% to 13,341 in the three months to the end of September compared with the same period last year, says the lender’s latest quarterly Market Monitor.
Looking across the country, customers released £261,946 on average in London. Older homeowners in the South East, South West and West Midlands on average released more than £100,000.
The survey says 60% of the property cash released was used to manage debt, 28% was used to clear mortgage borrowing, 25% was used rebroke equity release plans, and 7% repaid unsecured borrowing.
“Financial prudence born out of the pandemic and heightened by the cost-of-living crisis is encouraging over 55 homeowners to reduce their outgoings,” the report adds.
But the data finds that 20% of older homeowners still looked to support their families with an average of £53,503 being gifted to help younger members onto the property ladder, provide an early inheritance, repay debts, as well as subsidise university fees.
It says that although the bank of mum and dad used 11% of equity released in the third quarter to support family members, compared to 17% in 2021, it still “remains open for business and keen to support the wider family – especially with the recent stamp duty changes”.
The number of customers remortgaging existing equity release deals continued to rise with 17% making use of the recent flexibility of current products compared with 14% in the same period in 2021.
At the end of the third quarter, there were 582 products on the market with all new products offering penalty-free ad hoc capital repayments, 65% including downsizing protection and 63% allowing customers to serve interest, the study says.
Key chief executive Will Hale says: “While there is no doubt that we did see the market return to more normal post-pandemic trading conditions in the third quarter of this year, the political and economic turmoil over the last few weeks has, like the mainstream mortgage sector, impacted the rates and loan- to-values available.
“However, the cost-of-living crisis has continued to bite, inflation has hit double digits and older customers moving from fixed-rate mortgage deals to their lender’s standard variable rate have been shocked by the difference.
“With over-65 homeowners sitting on an estimated £3trn of unmortgaged property wealth and four in five of the customers who progress to speaking to one of our advisers looking to address a financial need, there is a clearly a key role for the sector to play in helping older customers navigate through the current economic challenges and still live a fulfilling later life.”
Air chief executive Stuart Wilson adds: “While there is no doubt that the cost-of-living crisis is being felt by older homeowners, the equity release market has not escaped the turmoil seen across other residential property markets.
“However, the range of flexibilities offered by these products is greater than we’ve ever seen – and advisers are also better trained, better prepared, and more knowledgeable.
“Making ad hoc capital repayments is now a standard feature offered by all new products and customers are actively being encouraged to manage the roll-up of interest by making ongoing payments. These products are arguably becoming more akin to residential mortgages but with more protections such as the no-negative equity guarantee.
“Early repayment charges, which have long been a bugbear for some customers, now start from as little as five years with the majority being fixed, accounting for 64% of products, or offering the choice between fixed and variable, accounting for 34% of products.
“Navigating the challenges ahead will not be easy but if advisers focus on helping customers to find the right option for their individual circumstances, the market will continue to thrive and grow.”