According to new analysis, retirees are boosting their finances by an average £71,500 from their property wealth.
Over-55s finance specialist, Key Retirement has found that there are continued demand for lump sum plans which now make up 36% of total sales and strong growth for enhanced plans for customers with lifestyle conditions.
Enhanced drawdown and enhanced lump sum lifetime mortgages made up 33% of sales in the three months to October 1st compared with 19% a year ago as total plan sales and property wealth released hit a new record.
Key’s Q3 Equity Release Market Monitor shows total property wealth released by new customers in the three months increased by 18% from the same period last year to £749 million while plan sales climbed by 26% to 10,477.
The average retired homeowner released £71,500 of property wealth from a house worth £325,000. In London pensioners made an average £133,000 from houses worth £655,000 while in the South East of England the average house price was more than £400,000 with pensioners releasing more than £84,000.
Sales of equity release plans increased in every region of the UK with Wales seeing growth of 51% year-on-year and East Anglia an increase of 46%. The only area which saw a fall in the value released was Scotland but plan sales still increased reflecting a drop in the average amount released.
Dean Mirfin, chief product officer at Key Retirement, said: “The new record for the third quarter means sales for the first nine months of the year have already nearly matched the total for all of 2016.
The growth in sales of enhanced equity release to a third of the market demonstrates the importance of quality advice in ensuring that customers receive the maximum value or lending terms from their property wealth.
Lump sum plans are maintaining their share of the market as they increasingly tend to be more appropriate for younger retirees looking to repay outstanding mortgages.
Increased competition and rate cuts across the equity release market are enabling customers to dramatically improve their quality of life in retirement and address a wide range of financial issues.”
More than one in five (22%) customers used property wealth to pay off outstanding mortgage debt, while 30% used the cash to clear debts and 36% used it to go on holiday. Over a quarter (26%) used the money to help family and friends up from 19% in Q3 2016. However, the most common reason for releasing cash was to get their home retirement ready. Almost two thirds (64%) used the wealth for home and garden improvements.
Drawdown plans – which enable customers to release money as they need it and keep costs down – made up 64% of sales while lump sum plans accounted for 36% of sales, both unchanged year on year.